<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 11, 1997
REGISTRATION NO. 333-37633
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PENTEGRA DENTAL GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 8021 76-0545043
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
------------------------------
<TABLE>
<S> <C>
PENTEGRA DENTAL GROUP, INC. GARY S. GLATTER
2999 NORTH 44TH STREET, STE. 650 2999 NORTH 44TH STREET, STE. 650
PHOENIX, ARIZONA 85018 PHOENIX, ARIZONA 85018
(602) 952-1200 (602) 952-1200
(Address, including zip code, and (Name and address, including zip code,
telephone number, including area code, and telephone number, including area
of registrant's principal executive code, of agent for service)
offices)
</TABLE>
------------------------------
COPIES TO:
<TABLE>
<S> <C>
RICHARD S. ROTH TED W. PARIS
JACKSON WALKER L.L.P. BAKER & BOTTS, L.L.P.
1100 LOUISIANA 910 LOUISIANA
SUITE 4200 SUITE 3000
HOUSTON, TEXAS 77002 HOUSTON, TEXAS 77002
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED MAXIMUM
TITLE OF EACH MAXIMUM AGGREGATE AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(1) PRICE(2),(3) FEE(4)
<S> <C> <C> <C> <C>
Common Stock, $.001 par value............ -- -- $31,625,000 $9,584
</TABLE>
(1) In accordance with Rule 457(o) under the Securities Act of 1933, as amended,
the number of shares being registered and the proposed maximum offering
price per share are not included in this table.
(2) Includes shares of Common Stock issuable upon exercise of the Underwriters'
over-allotment option.
(3) Estimated solely for purposes of calculating the registration fee.
(4) Previously paid.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
Subject To Completion, Dated December 11, 1997
PROSPECTUS
2,500,000 SHARES
PENTEGRA DENTAL GROUP, INC.
COMMON STOCK
----------------
All of the shares of Common Stock, par value $.001 per share ("Common
Stock"), offered hereby (the "Offering") are being offered by Pentegra Dental
Group, Inc. (the "Company"). Prior to the Offering, there has been no public
market for the Common Stock. It is currently estimated that the initial public
offering price will be between $9.00 and $11.00 per share. See "Underwriting"
for a discussion of the factors to be considered in determining the initial
public offering price. The Common Stock has been approved for listing on the
American Stock Exchange under the symbol "PEN."
---------------------
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 8.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting
Discounts
Price to and Proceeds to
Public Commissions(1) Company(2)
<S> <C> <C> <C>
Per Share......................................... $ $ $
Total(3).......................................... $ $ $
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."
(2) Before deducting estimated expenses of $2,300,000, payable by the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
375,000 additional shares of Common Stock on the same terms and conditions
as set forth above, solely to cover over-allotments, if any. If such option
is exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
---------------------
The shares of Common Stock offered by this Prospectus are offered by the
Underwriters, subject to prior sale, to withdrawal, cancellation or modification
of the offer without notice, to delivery to and acceptance by the Underwriters
and to certain further conditions. It is expected that delivery of certificates
representing the shares of Common Stock will be made at the offices of Lehman
Brothers Inc., New York, New York, on or about , 1998.
---------------------
LEHMAN BROTHERS RAUSCHER PIERCE REFSNES, INC.
, 1998
<PAGE>
[MAP]
THE COMPANY INTENDS TO FURNISH ITS STOCKHOLDERS WITH ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS AUDITED BY INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS AND WITH QUARTERLY REPORTS CONTAINING UNAUDITED SUMMARY FINANCIAL
INFORMATION FOR EACH OF THE FIRST THREE QUARTERS OF EACH FISCAL YEAR.
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES OF COMMON STOCK FOLLOWING THE
PRICING OF THE OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE COMMON STOCK
OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK, AND THE
IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
PENTEGRA DENTAL GROUP, INC. ("PENTEGRA" OR THE "COMPANY") WAS RECENTLY
FORMED TO SERVE, UPON COMPLETION OF THE OFFERING, AS THE PARENT CORPORATION OF
PENTEGRA INVESTMENTS, INC. ("PII"). CONCURRENTLY WITH THE CLOSING OF THE
OFFERING, (I) THE COMPANY WILL ACQUIRE, IN SEPARATE TRANSACTIONS (THE
"AFFILIATIONS"), SUBSTANTIALLY ALL THE TANGIBLE AND INTANGIBLE ASSETS, AND
ASSUME CERTAIN LIABILITIES, OF 50 DENTAL PRACTICES (COLLECTIVELY, THE "FOUNDING
AFFILIATED PRACTICES") IN EXCHANGE FOR CASH AND SHARES OF COMMON STOCK, (II) THE
HOLDERS OF COMMON STOCK OF PII WILL EXCHANGE EACH SHARE OUTSTANDING IMMEDIATELY
PRIOR TO THE CLOSING OF THE OFFERING (BUT AFTER GIVING EFFECT TO A REPURCHASE BY
PII OF SHARES OF ITS COMMON STOCK, AT A PURCHASE PRICE OF $.01 PER SHARE, SUCH
THAT THE TOTAL NUMBER OF SHARES OF COMMON STOCK ISSUABLE IN CONNECTION WITH THE
AFFILIATIONS AND THE SHARE EXCHANGE WILL NOT EXCEED 3,941,898 SHARES) FOR SHARES
OF COMMON STOCK ON A ONE-FOR-ONE BASIS (THE "SHARE EXCHANGE") PURSUANT TO AN
EXCHANGE AGREEMENT, (III) THE COMPANY WILL ACQUIRE (THE "PENTEGRA/ NAPILI
TRANSACTION") SUBSTANTIALLY ALL OF THE ASSETS OF TWO COMPANIES CONTROLLED BY THE
COMPANY'S CHAIRMAN OF THE BOARD, PENTEGRA, LTD. AND NAPILI, INTERNATIONAL
("NAPILI"), (IV) PII WILL REPURCHASE 245,835 SHARES OF ITS CLASS B PREFERRED
STOCK, PAR VALUE $0.01 PER SHARE ("CLASS B PREFERRED"), AT THE SUBSCRIPTION
PRICE PER SHARE PAID TO PII FOR THOSE SHARES AND, IMMEDIATELY THEREAFTER, REDEEM
ALL OF THE REMAINING SHARES OF ITS CLASS A PREFERRED STOCK, PAR VALUE $0.01 PER
SHARE ("CLASS A PREFERRED") AND CLASS B PREFERRED AT A REDEMPTION PRICE OF $2.00
PER SHARE (THE "REPURCHASE AND REDEMPTION") AND (V) THE COMPANY WILL REPAY
APPROXIMATELY $350,000 OF INDEBTEDNESS OUTSTANDING UNDER PROMISSORY NOTES ISSUED
BY THE COMPANY IN CONNECTION WITH ITS ORGANIZATIONAL FINANCING. THE NUMBER OF
SHARES OF COMMON STOCK TO BE ISSUED IN EACH AFFILIATION WILL DEPEND ON THE
INITIAL PUBLIC OFFERING PRICE OF THE COMMON STOCK. ACCORDINGLY, THE DISCLOSURES
HEREIN RELATING TO THE SHARES OF COMMON STOCK ISSUED IN CONNECTION WITH THE
AFFILIATIONS AND THE SHARE EXCHANGE ARE ESTIMATED, BASED ON AN ASSUMED INITIAL
PUBLIC OFFERING PRICE OF $10.00 PER SHARE (THE MIDPOINT OF THE ESTIMATED INITIAL
PUBLIC OFFERING PRICE RANGE). HOWEVER, SO LONG AS THE INITIAL PUBLIC OFFERING
PRICE IS LESS THAN $12.00, THE NUMBER OF SHARES OF COMMON STOCK TO BE ISSUED IN
CONNECTION WITH THE AFFILIATIONS AND THE SHARE EXCHANGE WILL NOT EXCEED
3,941,898 SHARES IN THE AGGREGATE. PENTEGRA DOES NOT EMPLOY DENTISTS TO PRACTICE
DENTISTRY NOR DOES IT OTHERWISE CONTROL THE PRACTICE OF DENTISTRY.
UNLESS OTHERWISE INDICATED BY THE CONTEXT, REFERENCES HEREIN TO (I)
"PENTEGRA" OR THE "COMPANY" INCLUDE PENTEGRA DENTAL GROUP, INC. AND PII AND (II)
"AFFILIATED PRACTICES" MEAN THE FOUNDING AFFILIATED PRACTICES AND ANY DENTAL
PRACTICES WITH WHICH THE COMPANY MAY ENTER INTO SIMILAR RELATIONSHIPS IN THE
FUTURE. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS (I) GIVES
EFFECT TO A REVERSE STOCK SPLIT OF THE OUTSTANDING SHARES OF COMMON STOCK OF PII
AND (II) ASSUMES THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED. THE
FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION
AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN
THIS PROSPECTUS.
THE COMPANY
Pentegra Dental Group, Inc. was recently formed to provide management,
administrative, development and other services to dental practices throughout
the United States. The Company's approach to dental practice management (the
"Pentegra Dental Program") was developed by Dr. Omer K. Reed, the Chairman of
the Board of the Company, and is designed to increase revenues and lower costs
at Affiliated Practices while freeing the practicing dentists to focus on the
delivery of high-quality care. The Company will earn management service fees
under long-term service agreements with Affiliated Practices (the "Service
Agreements"). In most cases, service fees payable to the Company under the
Service Agreements represent a share of the Affiliated Practices' operating
profits, thereby providing incentives for the Company and the Affiliated
Practices to work together to maximize practice profitability. The Company will
also seek to grow by acquiring and affiliating with additional dental practices.
The Company has entered into definitive acquisition agreements and Service
Agreements with 50 Founding Affiliated Practices, which include 77 dentists and
63 dental offices located in 18 states. The Founding Affiliated Practices are
primarily general dentistry practices, but also include specialists such as
periodontists, pedodontists and oral surgeons. In addition, the Company will
acquire from Dr. Reed the
3
<PAGE>
assets of a consulting firm, Pentegra, Ltd., which was founded in 1988, and a
seminar company, Napili, which was founded in 1963. The clinical, administrative
and marketing training developed and provided by these companies to practicing
dentists and their teams are the foundation for the Pentegra Dental Program.
After completion of the Offering, the Pentegra Dental Program will be available
exclusively to Affiliated Practices.
The Health Care Finance Administration ("HCFA") estimates that in 1995
approximately $43 billion was spent in the United States on dental services, and
projects annual dental expenditures will reach $79 billion in the year 2005. In
a 1995 survey, the American Dental Association ("ADA") reported that there were
approximately 153,000 active dentists in the United States, approximately 88% of
whom were practicing either alone or with only one other dentist. In recent
years, dentists have begun to consolidate into affiliated groups and with
practice management companies. Dentists who affiliate with practice management
companies gain several benefits, such as opportunities to achieve economies of
scale, to implement cost management techniques and to gain access to capital for
new equipment and other working capital needs.
The Company's objective is to become a leader in providing dental practice
management services. In order to achieve this objective, the Company's strategy
includes the following elements:
- FOCUS ON TRADITIONAL FEE-FOR-SERVICE DENTAL CARE. According to the 1997
Mercer Consulting Group Survey of Employer-Sponsored Health Plans,
approximately 86% of the respondents in that survey reported that they
offer their employees dental plans that pay for dental services on a
fee-for-service basis. The Company believes that fee-for-service care is
high-quality, highly profitable and professionally rewarding for dentists.
- INCREASE PRODUCTIVITY AND PROFITABILITY OF AFFILIATED PRACTICES BY
IMPLEMENTING THE PENTEGRA DENTAL PROGRAM. The Pentegra Dental Program
involves implementing techniques designed to increase revenues and lower
costs, as well as methods to make the dentist and his or her practice team
more efficient in the delivery of dental care.
- LOWER OPERATING COSTS BY ACHIEVING ECONOMIES OF SCALE. The Company
believes that, as a result of its size and resources, it will be able to
provide Affiliated Practices with certain management functions at lower
cost than if the Affiliated Practices were to perform the services by
themselves.
- FREE THE DENTIST TO FOCUS MORE TIME ON THE PRACTICE OF DENTISTRY. The
Company will relieve practicing dentists of administrative tasks. The
Company believes its management and administrative support will
substantially reduce the amount of time affiliated dentists are required
to spend on administrative matters and enable them to dedicate more time
and effort toward the growth of their professional practices.
- GROW THROUGH ACQUISITIONS AND AFFILIATIONS OF ADDITIONAL DENTAL
PRACTICES. The Company will generally seek to affiliate with practices
that have high potential for future growth, particularly through
implementation of the Pentegra Dental Program, an established reputation
for high-quality care and a strategic fit either in an existing market or
as an entry into a new market.
The Pentegra Dental Program is based on a cooperative approach that
emphasizes patient wellness and involves the dentist and his or her patient
mutually agreeing on a program to achieve and maintain optimal oral health. The
Company believes that the average dentist has the skills necessary to diagnose
and provide appropriate care to patients, but many of them have not developed
the skills needed to obtain patient acceptances of, and commitments to, the
treatment plans. As a result, a significant amount of recommended care may not
be completed, with correspondingly lower revenues to the dentists. The Company
will provide training and support to assist affiliated dentists and their teams
to communicate effectively with each patient regarding the type and value of
care needed, to obtain the patient's commitment to a treatment plan and then to
implement the agreed-upon treatment. In order to promote operational efficiency
and assure quality of care at Affiliated Practices, the Company's information
systems
4
<PAGE>
will monitor patient treatment plans and track the number and type of procedures
performed by each practice. Additionally, the Company will provide the
Affiliated Practices with billing and collections, purchasing, inventory
management, invoice processing and payment, payroll processing, patient
scheduling and financial reporting and analysis relating to the implementation
of the Pentegra Dental Program. The Company anticipates that the cost of
implementing the Pentegra Dental Program in Affiliated Practices primarily
consists of compensation expenses to existing Pentegra, Ltd. and Napili
employees and will be comparable to the historical compensation expense levels
for those two entities.
The Service Agreements with the professional corporations or associations to
be formed by the dentist owners of the Founding Affiliated Practices have
initial terms of 40 years, subject to earlier termination under certain
circumstances. Pursuant to the Service Agreements, the Company will become the
exclusive manager and administrator of non-dental services relating to the
operation of the Founding Affiliated Practices, and will, among other things,
(i) administer the billing and collections for the Founding Affiliated
Practices, (ii) provide the necessary clerical, accounting and other non-dental
services to the Founding Affiliated Practices and (iii) provide facilities and
equipment for the Founding Affiliated Practices. The service fees payable by the
Founding Affiliated Practices to the Company under the Service Agreements are
based on fair market value of the services to be provided. Generally the service
fee are computed based on (i) a percentage of revenues less operating expenses,
(ii) a percentage of revenues not to exceed a percentage of revenues less
operating expenses, (iii) a specific fixed service fee or (iv) some combination
of these. See "Business--Service Agreements."
Dentist compensation is determined by the Affiliated Practices pursuant to
employment arrangements between the Affiliated Practice and the individual
dentists. The Company does not participate in the negotiation of dentist
compensation. Pursuant to the terms of the Service Agreements, the Affiliated
Practices will continue to provide dental services and will be exclusively in
control of all aspects of the practice of dentistry and the provision of dental
services. The Company will not engage in the practice of dentistry.
As a result of the Affiliations and upon completion of the Offering, the
dentist-owners of the Founding Affiliated Practices and the executive officers
and directors of the Company will beneficially own approximately 57.4% of the
outstanding shares of Common Stock. See "Certain Transactions--Organization of
the Company" and "Principal Stockholders."
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company...... 2,500,000 shares
Common Stock to be outstanding after the
Offering............................... 6,441,898 shares(1)
Use of proceeds.......................... To fund the cash distribution to the
dentist-owners of the Founding Affiliated
Practices (approximately $6.4 million), to fund
the Pentegra/Napili Transaction (approximately
$200,000), to repurchase or redeem the
outstanding shares of preferred stock of PII
(approximately $2.8 million), to repay certain
indebtedness of Pentegra and the Founding
Affiliated Practices (approximately $2.7 million)
and the 9.5% promissory notes issued by the
Company in connection with its organizational
financing ($350,000), to purchase certain
accounts receivable of the Founding Affiliated
Practices (approximately $428,000) and for
general corporate purposes. See "Use of
Proceeds."
American Stock Exchange symbol........... PEN
</TABLE>
- ---------
(1) Includes 2,622,269 shares of Common Stock to be issued in connection with
the Affiliations and 1,319,629 shares of Common Stock to be issued in
connection with the Share Exchange and excludes (i) an aggregate of 671,667
shares of Common Stock issuable upon exercise of stock options to be granted
under the Company's 1997 Stock Compensation Plan (the "1997 Stock
Compensation Plan") effective on the date the Offering closes at an exercise
price equal to the initial public offering price per share and (ii)
1,328,333 shares reserved for future issuance under the 1997 Stock
Compensation Plan. See "Management--1997 Stock Compensation Plan."
RISK FACTORS
The Common Stock offered hereby involves a high degree of risk. See "Risk
Factors."
6
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS EXCEPT PER SHARE DATA)
Upon completion of the Offering and pursuant to the Affiliations, the
Company will acquire substantially all the tangible and intangible assets and
assume certain liabilities of the Founding Affiliated Practices. Due to the fact
that the Company has had no significant operations to date, no pro forma
statement of operations has been included in this Prospectus. The nature and
amount of costs to be incurred by the Company in connection with the management
services it will provide to the Founding Affiliated Practices may differ from
the costs historically incurred by the Founding Affiliated Practices. The
summary historical financial information presented below has been derived from
the audited financial statements of Pentegra Dental Group, Inc. included in this
Prospectus. Except as indicated, the following information does not reflect the
effects of the Offering, the Affiliations, the Share Exchange, the Pentegra/
Napili Transaction and the Repurchase and Redemption. For certain information
concerning the Affiliations, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Note 4 of Notes to the
Pentegra Dental Group, Inc. financial statements.
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
INCEPTION (FEBRUARY
21, 1997) THROUGH
SEPTEMBER 30,
1997
-------------------
<S> <C>
Statement of Operations Data:
Revenue...................................................................................... $ --
Expenses
General and administrative expenses........................................................ 411
Other expenses............................................................................. 339
------
Total expenses........................................................................... 750
------
Net loss................................................................................... $ (750)
------
------
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
----------------------------
HISTORICAL AS ADJUSTED(1)
----------- ---------------
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents(2)........................................................... $ 354 $ 9,471
Working capital (deficit).............................................................. (652) 8,586
Total assets........................................................................... 2,071 12,997
Redeemable preferred stock............................................................. 1,089 --
Stockholders' equity (deficit)......................................................... (24) 11,558
</TABLE>
- ------------
(1) As adjusted gives effect to (i) the Offering, (ii) the Affiliations, (iii)
the repayment of certain indebtedness of Pentegra and the Founding
Affiliated Practices, (iv) the Pentegra/Napili Transaction, (v) the Share
Exchange and (vi) the Repurchase and Redemption, as if such transactions had
occurred on September 30, 1997. See the Unaudited Pro Forma Balance Sheet of
Pentegra and the notes thereto included in this Prospectus.
(2) See "Use of Proceeds."
7
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS,
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FOLLOWING FACTORS IN EVALUATING THE
COMPANY AND ITS BUSINESS BEFORE PURCHASING ANY OF THE SHARES OF THE COMMON STOCK
OFFERED HEREBY. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
DISCUSSED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS,
INCLUDING THOSE SET FORTH BELOW AND ELSEWHERE IN THIS PROSPECTUS.
ABSENCE OF COMBINED OPERATING HISTORY; NO PRIOR OPERATING EXPERIENCE
The Company was incorporated in 1997 and has conducted no operations to date
other than in connection with the Offering and the Affiliations. The Company has
entered into agreements to acquire substantially all the assets and assume
certain liabilities of the Founding Affiliated Practices concurrently with the
closing of the Offering. In connection with the Affiliations, the Company is
entering into Service Agreements with the Founding Affiliated Practices for
initial terms of 40 years (subject to early termination by either party for
"cause," which includes a material default by or bankruptcy of the other party).
See "Business--Service Agreements." Historically, the Founding Affiliated
Practices have operated as separate independent entities. There can be no
assurance that the process of integrating the management and administrative
functions of the Founding Affiliated Practices will be successful or that the
Company's management will be able to manage these operations effectively or
implement the Company's operating or expansion strategies successfully. Failure
by the Company to implement its operating and expansion strategies successfully
would have a material adverse effect on the Company. See "Business--Business
Strategy" and "--Service Agreements."
RELIANCE ON AFFILIATED PRACTICES AND DENTISTS
The Company will receive fees for management services provided to the
Affiliated Practices under the Service Agreements. It will not employ dentists
or control the practice of dentistry by the dentists employed by the Affiliated
Practices, and its management services revenue generally will depend on revenue
generated by the Affiliated Practices. In some cases, the management fees will
be based on the costs and expenses the Company incurs in connection with
providing management services. While the laws of some states permit the Company
to participate in the negotiations by Affiliated Practices of managed care
contracts, preferred provider arrangements and other negotiated price
agreements, the Affiliated Practices will be the contracting parties for those
relationships, and the Company will be dependent on its Affiliated Practices for
the success of any such relationships. Accordingly, the profitability of those
payor relationships, as well as the performance of the individual dentists
employed by the Affiliated Practices, will affect the Company's profitability.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview" and "Business--Service Agreements."
The revenue of the Affiliated Practices (and, therefore, the success of the
Company) is dependent on fees generated by the dentists employed by the
Affiliated Practices. In connection with the Service Agreements, each dentist
who owns a Founding Affiliated Practice will enter into a five-year employment
agreement with the professional corporation or other entity with which that
dentist is affiliated (and which is a party to a Service Agreement). The dentist
employment agreements provide that the employee dentist will not compete with
the Affiliated Practice during the term of the agreement and following the
termination of the agreement for a term of two years in a specified geographical
area. In most states, however, a covenant not to compete will be enforced only
to the extent it is necessary to protect a legitimate business interest of the
party seeking enforcement, does not unreasonably restrain the party against whom
enforcement is sought and is not contrary to the public interest. This
determination is made based on all the facts and circumstances of the specific
case at the time enforcement is sought. Thus, there can be no assurance that a
court will enforce such a covenant in a given situation. In addition, no
judicial precedents have addressed whether a dental practice management
company's interest under a management or service agreement will be viewed as the
type of protectable business interest that would permit it
8
<PAGE>
to enforce such a covenant or to require an affiliated practice to enforce such
covenants against an employee dentist. A substantial reduction in the number of
dentists employed by or associated with the Affiliated Practices could have a
material adverse effect on the financial performance of the Company. Failure by
the Affiliated Practices to employ a sufficient number of dentists (whether by
renewals of existing employment agreements or otherwise) would have a material
adverse effect on the Company. See "Business--Dentist Employment Agreements."
DEPENDENCE ON MANAGEMENT INFORMATION SYSTEMS
The success of the Company's business strategy will be dependent on, among
other things, the successful implementation of new management information
systems and other operating systems to permit the effective integration of the
administrative operations of the Affiliated Practices into the Company's
operations. For example, the Company will be required to integrate its financial
information system with existing practice management systems at the Affiliated
Practices, which may be different from those used by the Company. Any
significant delay or increase in expense associated with the conversion and
integration of management information systems used by Affiliated Practices could
have a material adverse effect on the successful implementation of the Company's
expansion strategy. In addition, the Company will have some systems that are
decentralized, including cash collections. Accordingly, the Company will rely on
local staff for certain functions, including transferring cash from the
Affiliated Practices to the Company. See "Business--Management Information
Systems."
RISKS ASSOCIATED WITH EXPANSION STRATEGY
GENERAL
The success of the Company's expansion strategy will depend on a number of
factors, including the Company's ability to (i) identify attractive and willing
candidates to become Affiliated Practices in suitable markets and in suitable
locations within those markets, (ii) affiliate with acceptable Affiliated
Practices on favorable terms, (iii) adapt the Company's structure to comply with
present or future legal requirements affecting the Company's arrangements with
Affiliated Practices and comply with regulatory and licensing requirements
applicable to dentists and facilities operated and services offered by dentists,
(iv) obtain suitable financing to facilitate its expansion program and (v)
expand the Company's infrastructure and management to accommodate expansion. A
shortage of available dentists with the skills and experience sought by the
Company would have a material adverse effect on the Company's expansion
opportunities, and the Company anticipates facing substantial competition from
other companies to establish affiliations with additional dental practices. In
addition, there can be no assurance that the Company's expansion strategy will
be successful, that modifications to the Company's strategy will not be required
or that the Company will be able to manage effectively and enhance the
profitability of additional Affiliated Practices. There can be no assurance that
the Company will be able to achieve planned growth, that the assets of dental
practices will continue to be available for acquisition by the Company, that the
Company will be able to realize expected operating and economic efficiencies
from pending or future affiliations or that future affiliations with additional
Affiliated Practices will be profitable. See "--Competition," "--Immediate and
Substantial Dilution and Absence of Dividends," "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview" and
"Business--Business Strategy."
POTENTIAL DILUTION OF EXISTING STOCKHOLDERS; NONCASH AMORTIZATION CHARGES
Using shares of Common Stock as consideration for (or in order to provide
financing for) future acquisitions could result in significant dilution to
then-existing stockholders. In addition, future acquisitions accounted for as
purchases may result in substantial annual noncash amortization charges for
intangible assets in the Company's statements of operations.
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NEED FOR ADDITIONAL FINANCING
The Company's expansion program will require substantial capital resources.
Capital is needed not only for the acquisition of the assets of additional
Affiliated Practices, but also for the effective integration, operation and
expansion of the Affiliated Practices. The Affiliated Practices may from time to
time require capital for renovation and expansion and for the addition of
equipment and technology. The Company believes the net proceeds from the
Offering and cash flow from operations will be sufficient to meet the Company's
anticipated expansion and working capital needs through the end of 1998.
Thereafter, however, the Company may require additional capital from outside
financing sources in order to continue its expansion program. There can be no
assurance that the Company will be able to obtain additional funds when needed
on satisfactory terms or at all. Any significant limitation on the Company's
ability to obtain additional financing could have a material adverse effect on
the Company. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
PROCEEDS OF OFFERING PAYABLE TO AFFILIATES
In connection with the closing of the Affiliations, the Company will pay,
out of the net proceeds from the Offering, an aggregate of approximately $6.7
million to promoters (including the dentist-owners of the Founding Affiliated
Practices), officers and directors of the Company. Of this amount, approximately
$6.4 million will be paid to the owners of the Founding Affiliated Practices,
including approximately $216,326 to Ronnie L. Andress, D.D.S., $130,027 to James
H. Clarke, Jr., D.D.S., $143,183 to Mack E. Greder, D.D.S., $144,017 to Roger
Allen Kay, D.D.S., and $295,830 to Ronald M. Yaros, D.D.S. (each of whom will
become a member of the Board of Directors of the Company (the "Board of
Directors"). In addition, the Company will use $200,000 of the net proceeds from
the Offering to purchase substantially all of the tangible and intangible assets
of Pentegra, Ltd. and Napili, both of which entities are affiliates of Dr. Reed,
the Company's Chairman of the Board. The Company will also use approximately (i)
$2.8 million of the proceeds from the Offering in connection with the Repurchase
and Redemption of PII's Class A Preferred and Class B Preferred, including
approximately $37,500 to Dr. Reed, $37,500 to Gary S. Glatter, $37,500 to George
M. Siegel, $334 to James L. Dunn, Jr., $667 to J. Michael Casas, $50,000 to Dr.
Greder and $50,000 to Dr. Kay (each of whom is, or on closing of the Offering
will be, a member of the Board of Directors or an officer of the Company), (ii)
approximately $350,000 of the proceeds from the Offering in connection with the
repayment of 9.5% promissory notes issued by the Company to fund certain
offering and operating expenses, including approximately $25,000 to each of
James M. McDonough, D.D.S. and Harold A. Pebbles, Jr., D.D.S. (both of whom are
dentist-owners of Founding Affiliated Practices), and (iii) an aggregate of
approximately $428,000 of the net proceeds of the Offering in connection with
the purchase of certain accounts receivable from the Founding Affiliated
Practices. See "Use of Proceeds" and "Certain Transactions--Organization of the
Company."
GOVERNMENT REGULATION
Various federal and state laws regulate the dental services industry.
Regulatory oversight includes, but is not limited to, considerations of
corporate practice of dentistry, fee splitting, fraud and abuse, self-referral,
false claims and insurance regulation.
CORPORATE PRACTICE OF DENTISTRY AND FEE SPLITTING RESTRICTIONS
The laws of many states, including all the states in which the Founding
Affiliated Practices are located other than New Mexico and Wisconsin, prohibit
business corporations such as the Company from engaging in the practice of
dentistry or employing dentists to practice dentistry. The specific restrictions
against the corporate practice of dentistry, as well as the interpretation of
those restrictions by state regulatory authorities, vary from state to state.
The restrictions are generally designed to prohibit a non-dental entity (such as
the Company) from controlling the professional assets of a dental practice (such
as patient records and payor contracts), employing dentists to practice
dentistry (or, in certain states, employing dental
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hygienists or dental assistants), or controlling the content of a dentist's
advertising or professional practice. The laws of many states, including all the
states in which the Founding Affiliated Practices are located other than Alaska,
Maine, Massachusetts, New Mexico and Wisconsin, also prohibit dentists from
sharing professional fees with non-dental entities. State dental boards do not
generally interpret these prohibitions as preventing a non-dental entity from
owning non-professional assets used by a dentist in a dental practice or
providing management services to a dentist for a fee, provided certain
conditions are met. The Company believes that its operations will not contravene
any applicable restriction on the corporate practice of dentistry. There can be
no assurance, however, that a review of the Company's business relationships by
courts or regulatory authorities will not result in determinations that could
prohibit or otherwise adversely affect the operations of the Company or that the
regulatory environment will not change, requiring the Company to reorganize or
restrict its existing or future operations. The laws regarding fee-splitting and
the corporate practice of dentistry and their interpretation are enforced by
regulatory authorities with broad discretion. There can be no assurance that the
legality of the Company's business or its relationship with the Affiliated
Practices will not be successfully challenged or that the enforceability of the
provisions of any Service Agreement will not be limited.
FRAUD AND ABUSE LAWS AND RESTRICTIONS ON REFERRALS AND SELF-REFERRALS
Many states in which the Founding Affiliated Practices are located,
including California, Florida, Maine, Maryland, Michigan, New York, Texas and
Washington, have fraud and abuse laws that, in many cases, apply to referrals
for items or services reimbursable by any insurer, not just by Medicare and
Medicaid. A number of states, including many of the states in which the Founding
Affiliated Practices are located, also impose significant penalties for
submitting false claims for dental services. In addition, most of the states in
which the Founding Affiliated Practices are located, including Alaska, Arizona,
California, Florida, Louisiana, Maine, Maryland, Michigan, New York, Texas and
Washington, have laws prohibiting paying or receiving any remuneration, direct
or indirect, that is intended to induce referrals for health care items or
services, including dental items and services. Many states in which the Founding
Affiliated Practices are located either prohibit or require disclosure of
self-referral arrangements and impose penalties for the violation of these laws.
Many states, including Alaska, Florida and Maine, limit the ability of a person
other than a licensed dentist to own or control equipment or offices used in a
dental practice. Some of these states allow leasing of equipment and office
space to a dental practice under a bona fide lease, if the equipment and office
remain under the control of the dentist.
ADVERTISING RESTRICTIONS AND LIMITATIONS ON DELEGATION
Some states prohibit the advertising of dental services under a trade or
corporate name. Some states, including Texas, require all advertisements to be
in the name of the dentist. A number of states also regulate the content of
advertisements of dental services and the use of promotional gift items. In
addition, many states impose limits on the tasks that may be delegated by
dentists to hygienists and dental assistants. These laws and their
interpretations vary from state to state and are enforced by the courts and by
regulatory authorities with broad discretion.
INSURANCE REGULATION
There are certain state insurance regulatory risks associated with the
Company's anticipated role in negotiating and administering managed care
contracts on behalf of the Affiliated Practices. The application of state
insurance laws to third-party payor arrangements, other than fee-for-service
arrangements, is an unsettled area of law with little guidance available. State
insurance laws are subject to broad interpretation by regulators and, in some
states, state insurance regulators may determine that the Company or the
Affiliated Practices are engaged in the business of insurance because of the
capitation features (or similar features under which an Affiliated Practice
assumes financial risk) that may be contained in managed care contracts. In the
event the Company or an Affiliated Practice is determined to
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be engaged in the business of insurance, the Company or the Affiliated Practice
could be required to either seek licensure as an insurance company or change the
form of its relationships with the third-party payors. There can be no assurance
that the Company's operations would not be adversely affected if the Company or
any of the Affiliated Practices were to become subject to state insurance
regulations.
HEALTH CARE REFORM
The United States Congress has considered various types of health care
reform, including comprehensive revisions to the current health care system. It
is uncertain what legislative proposals, if any, will be adopted in the future
or what actions federal or state legislatures or third-party payors may take in
anticipation of or in response to any health care reform proposals or
legislation. There can be no assurance that applicable federal or state laws and
regulations will not change or be interpreted in the future either to restrict
or adversely affect the Company's relationships with dentists or the operation
of Affiliated Practices. See "Business--Government Regulation."
RISKS ASSOCIATED WITH COST CONTAINMENT INITIATIVES
The health care industry, including the dental services market, is
experiencing a trend toward cost containment, as third-party and government
payors seek to impose lower reimbursement rates on providers. The Company
believes this trend will continue and will increasingly affect dental services.
This may result in a reduction in per-patient and per-procedure revenue from
historical levels. There can be no assurance that any reductions in revenues and
operating margins could be offset through cost reductions, increased volume,
introduction of new procedures or otherwise. Accordingly, significant reductions
in payments to Affiliated Practices or other changes in reimbursement by
third-party payors for dental services performed by Affiliated Practices may
have a material adverse effect on the Company.
RISKS ASSOCIATED WITH MANAGED CARE CONTRACTS; CAPITATED FEE REVENUE
The Company believes that managed care arrangements are becoming more
prevalent in certain sectors of the dental services industry. As an increasing
percentage of the population is covered by managed care organizations that
provide dental coverage, the Company believes its future success may be
dependent, in part, on its ability to assist the Affiliated Practices in
negotiating contracts with dental health maintenance organizations, insurance
companies, self insurance plans and other private third-party payors pursuant to
which services will be provided on some type of fee-for-service or capitated
basis by some of its Affiliated Practices. Under certain capitated contracts,
the health care provider accepts a predetermined amount per patient per month as
its sole payment in exchange for providing a specific schedule of services to
enrollees. These contracts shift much of the risk of providing health care from
the payor to the provider. To the extent that an Affiliated Practice enters into
capitated managed care arrangements, it will be exposed to the risk that the
cost of providing dental care required by these contracts exceeds the amount the
Affiliated Practice receives for providing such care. If those costs exceed the
revenues received for the service provided, the Affiliated Practice will remain
responsible under its Service Agreement for reimbursing the Company for all of
the costs associated with providing those services, even if no service fee is
due thereunder. To the extent an Affiliated Practice enters into additional
managed care contracts, it may achieve greater predictability of revenues but
greater unpredictability of expenses due to the fluctuating costs of the
services provided. There can be no assurance that the Company will be able to
negotiate on behalf of the Affiliated Practices satisfactory arrangements on a
capitated basis, regardless of the amount of risk sharing. In addition, to the
extent that patients or enrollees covered by certain of these contracts require,
in the aggregate, more frequent or extensive care than anticipated, operating
margins may be reduced, or the revenues derived from these agreements may be
insufficient to cover the costs of the services provided. As a result,
Affiliated Practices would be at risk for additional costs which would reduce or
eliminate any earnings for the Affiliated Practices under these contracts, with
a corresponding reduction in or elimination of the service fee payable to the
Company in those cases where the Service Agreements provide for percentage-based
service fees.
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CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS
Following the completion of the Affiliations and the Offering, Dr. Reed, the
Company's Chairman of the Board, the other executive officers and directors of
the Company as a group and the owners of the Founding Affiliated Practices other
than Dr. Reed will beneficially own approximately 2.3%, 16.0% and 40.2%,
respectively, of the outstanding shares of Common Stock. These persons, if
acting in concert, will be able to exercise control over the Company's affairs,
elect the entire Board of Directors and (subject to Section 203 of the Delaware
General Corporation Law ("DGCL")) control the outcome of any matter submitted to
a vote of stockholders.
POTENTIAL CONFLICTS OF INTEREST
Each of Drs. Reed, Andress, Clarke, Greder, Kay and Yaros is the sole
shareholder of a Founding Affiliated Practice and a professional corporation or
association owned by them will be a party to a Service Agreement with the
Company. In connection with the provision of management services by the Company
to the Affiliated Practice owned by these dentists, there are potential
conflicts of interest that may arise from time to time in connection with
negotiating terms of working capital loans from the Company to that practice, if
any, and certain other arrangements under the Service Agreement.
BOARD COMPOSITION
The Company's Bylaws provide that a majority of the members of the Board of
Directors must be licensed dentists who are affiliated with Affiliated
Practices. As a result, there will be a limited group of persons from which
candidates to fill these board positions may be selected, and it is not
anticipated that many of these persons will have had prior experience as board
members of publicly held companies. In addition, each of Dr. Reed and the other
board members who own an Affiliated Practice will be a party to a Service
Agreement with the Company. In connection with the provision of management
services by the Company to the Affiliated Practices owned by those dentists,
potential conflicts may arise. See "Security Ownership of Certain Beneficial
Owners and Management" and "Certain Transactions."
DEPENDENCE ON KEY PERSONNEL
The Company's future performance depends in significant part on the
continued service of its senior management, including Dr. Reed and Gary S.
Glatter, the President and Chief Executive Officer of the Company. There can be
no assurance that these individuals will continue to work for the Company. Loss
of services of those persons could have a material adverse effect on the
Company. The success of the Company's growth strategy will also depend on the
Company's ability to attract and retain additional high quality personnel. See
"Business--Employees" and "Management."
COMPETITION
The Company anticipates facing substantial competition from other companies
to establish affiliations with additional dental practices. The Company is aware
of several publicly traded dental practice management companies that have
operations in jurisdictions where one or more of the Founding Affiliated
Practices conduct business (including Castle Dental Centers, Inc., Monarch
Dental Corporation, Coast Dental Services, Inc., Gentle Dental Service Corp.,
Apple Orthodontix, Inc., OrthAlliance, Inc. and Orthodontic Centers of America,
Inc.) and several companies pursuing similar strategies in other segments of the
health care industry. Certain of these competitors have greater financial and
other resources than the Company and have operations in areas where the Company
may seek to expand in the future. Additional companies with similar objectives
are expected to enter the Company's markets and compete with the Company. In
addition, the business of providing dental services is highly competitive in
each market in which the Company will operate. Each of the Founding Affiliated
Practices faces local competition from other dentists, pedodontists (dentists
specializing in the care of children's teeth) and other providers of specialty
dental services (such as periodontists, orthodontists and oral surgeons) some of
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whom have more established practices. There can be no assurance that the Company
or the Affiliated Practices will be able to compete effectively with their
respective competitors, that additional competitors will not enter their markets
or that additional competition will not have a material adverse effect on the
Company or the Affiliated Practices. See "Business--Competition."
MALPRACTICE RISKS OF PROVIDING DENTAL SERVICES
The Affiliated Practices provide dental services to the public and are
exposed to the risk of professional liability and other claims. In recent years,
dentists have become subject to an increasing number of lawsuits alleging
malpractice and related legal theories. Some of these lawsuits may involve large
claims and significant defense costs. Any suits involving the Company or
dentists at the Affiliated Practices, if successful, could result in substantial
damage awards to the claimants that may exceed the limits of any applicable
insurance coverage. Although the Company will not control the practice of
dentistry by the Affiliated Practices, it could be asserted that the Company
should be held liable for malpractice of a dentist employed by an Affiliated
Practice. Each Affiliated Practice has undertaken to comply with all applicable
regulations and legal requirements, and the Company maintains liability
insurance for itself. There can be no assurance, however, that a future claim or
claims will not be successful or, if successful, will not exceed the limits of
available insurance coverage or that such coverage will continue to be available
at acceptable costs. Malpractice insurance, moreover, can be expensive and
varies from state to state. Successful malpractice claims asserted against the
Affiliated Practices (or their dentists) or the Company may have a material
adverse effect on the Company. See "Business--Litigation and Insurance."
POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON STOCK
The market price of the Common Stock of the Company could be adversely
affected by the sale of substantial amounts of the Common Stock in the public
market following the Offering. The shares being sold in the Offering will be
freely tradable unless acquired by affiliates of the Company.
Concurrently with the closing of the Offering, the owners of the Founding
Affiliated Practices will receive, in the aggregate, 2,622,269 shares of Common
Stock as a portion of the consideration for the assets of their practices.
Certain other stockholders of the Company will hold, in the aggregate, an
additional 1,319,629 shares of Common Stock. Those shares are not being offered
and sold pursuant to this Prospectus. All of those 3,941,898 shares were or are
being issued in transactions that have not been registered under the Securities
Act and, accordingly, such shares may not be sold except in transactions
registered under the Securities Act or pursuant to an exemption from
registration. In addition, the Company's executive officers, directors and
current stockholders and the persons acquiring shares of Common Stock in
connection with the Affiliations have agreed with the Company that they will not
sell any of the shares of Common Stock owned by them immediately after the
consummation of the Affiliations for a period of one year following the closing
of the Offering, subject to their right to exercise certain piggy-back
registration rights. After the expiration of that restricted period, all of
those shares may be sold in accordance with Rule 144 under the Securities Act,
subject to the applicable volume limitations, holding period and other
requirements of Rule 144.
The Company and its directors, executive officers and current stockholders
have agreed not to offer or sell any shares of Common Stock for a period of 180
days (the "180-Day Lockup Period") following the date of this Prospectus without
the prior written consent of Lehman Brothers Inc., except that the Company may,
subject to certain conditions, issue Common Stock in connection with
acquisitions and awards under the 1997 Stock Compensation Plan.
Following completion of the Offering, the Company intends to register the
issuance of an additional 1,500,000 shares of its Common Stock under the
Securities Act subsequent to completion of the Offering for use by the Company
as all or a portion of the consideration to be paid in future acquisitions.
Those shares will generally be freely tradable by nonaffiliates after their
issuance, unless the resale thereof is
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contractually restricted, and resales of those shares during the 180-Day Lockup
Period would require the prior written consent of Lehman Brothers Inc.
The Company anticipates that, prior to the consummation of the Offering, the
Company will have outstanding under the 1997 Stock Compensation Plan options to
purchase approximately 671,667 shares of Common Stock. The Company intends to
register the shares issuable upon exercise of options granted under the 1997
Stock Compensation Plan. See "Management--1997 Stock Compensation Plan" and
"Shares Eligible for Future Sale."
NO PRIOR MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common Stock,
and there can be no assurance that an active trading market will develop or, if
a trading market does develop, that it will continue after the Offering. The
initial public offering price of the Common Stock, which will be determined
through negotiations between the Company and the Underwriters, may not be
indicative of the price at which the Common Stock will trade after the Offering.
See "Underwriting" for a description of the factors to be considered in
determining the initial public offering price. The securities markets have, from
time to time, experienced significant price and volume fluctuations that may be
unrelated to the operating performance of particular companies. These
fluctuations often substantially affect the market price of a company's common
stock. The market prices for securities of medical and dental practice
management companies have in the past been, and can be expected to be,
particularly volatile. The market price of the Common Stock could be subject to
significant fluctuations in response to numerous factors, including variations
in financial results or announcements of material events by the Company or its
competitors. Regulatory changes, developments in the health care industry or
changes in general conditions in the economy or the financial markets could also
adversely affect the market price of the Common Stock.
CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Restated Certificate of Incorporation
(the "Certificate of Incorporation") and Bylaws and of the DGCL could, together
or separately, discourage potential acquisition proposals, delay or prevent a
change in control of the Company or limit the price that certain investors might
be willing to pay in the future for shares of the Common Stock. The Certificate
of Incorporation provides for "blank check" preferred stock, which may be issued
without stockholder approval and provides for a "staggered" Board of Directors.
In addition, certain provisions of the Company's Bylaws restrict the right of
the stockholders to call a special meeting of stockholders, to nominate
directors, to submit proposals to be considered at stockholders' meetings and to
adopt amendments to the Bylaws, and the Bylaws require that at least a majority
of the members of the Board of Directors be licensed dentists who are affiliated
with Affiliated Practices. The Company also is subject to Section 203 of the
DGCL, which, subject to certain exceptions, prohibits a Delaware corporation
from engaging in any of a broad range of business acquisitions with an
"interested stockholder" for a period of three years following the date such
stockholder became an interested stockholder. See "Description of Capital
Stock."
IMMEDIATE AND SUBSTANTIAL DILUTION; ABSENCE OF DIVIDENDS
Purchasers of shares of Common Stock offered hereby will experience
immediate and substantial dilution in the pro forma net tangible book value of
their shares in the amount of $10.23 per share. Existing stockholders will
receive an increase of $2.72 per share in the pro forma net tangible book value
of their shares, which have a historical deficit in net tangible book value per
share of $(0.95) as of September 30, 1997. See "Dilution." In the event the
Company issues additional Common Stock in the future, including shares that may
be issued in connection with future acquisitions, purchasers of Common Stock in
the Offering may experience further dilution in the net tangible book value per
share of Common Stock. The Company has never paid any cash dividends and does
not anticipate paying cash dividends on its Common Stock in the foreseeable
future. See "Dividend Policy."
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THE COMPANY
The Company has conducted no operations to date other than in connection
with the Offering and the Affiliations. PII was formed in February 1997 and
changed its name from "Pentegra Dental Group, Inc." to "Pentegra Investments,
Inc." in July 1997. PII then organized Pentegra Dental Group, Inc. as its wholly
owned subsidiary in July 1997 to, among other things, complete the Offering, the
Affiliations, the Share Exchange, the Pentegra/Napili Transaction and the
Repurchase and Redemption. The Company has entered into agreements to acquire
substantially all the assets and assume certain liabilities of the Founding
Affiliated Practices, Pentegra, Ltd. and Napili concurrently with the closing of
the Offering. The Company's principal executive offices are located at 2999 N.
44th Street, Suite 650, Phoenix, Arizona 85018, and its telephone number is
(602) 952-1200.
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USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby (after deducting the underwriting discounts and commissions and
estimated offering expenses (excluding the offering expenses previously funded
with proceeds from the issuance of promissory notes and capital stock of PII,
including all the Class A Preferred and Class B Preferred involved in the
Repurchase and Redemption)) are estimated to be approximately $22.0 million
(approximately $24.8 million if the Underwriters' over-allotment option is
exercised in full), assuming an initial public offering price of $10.00 per
share (the midpoint of the estimated initial public offering price range). Of
those net proceeds, (i) approximately $6.4 million will be used to pay the cash
portion of the consideration for the Affiliations, (ii) $200,000 will be used to
effect the Pentegra/Napili Transaction, (iii) approximately $2.8 million will be
used in connection with the Redemption and Repurchase (approximately $1.5
million has been received by the Company as proceeds in connection with the 1997
issuances of the shares of Class A Preferred and Class B Preferred to be
repurchased or redeemed), (iv) approximately $2.7 million will be used to repay
certain indebtedness of the Company and the Founding Affiliated Practices
(approximately $543,000 of which was incurred in 1997 by certain Founding
Affiliated Practices to acquire dental equipment), (v) approximately $350,000
will be used to repay 9.5% promissory notes issued by the Company subsequent to
September 30, 1997 to fund certain offering and operating expenses, which notes
mature on the earlier of the first anniversary of the date of issuance or 30
days following consummation of the Offering, and (vi) approximately $428,000
will be used to purchase certain accounts receivable of the Founding Affiliated
Practices. The remaining net proceeds will be used for general corporate
purposes, which are expected to include future acquisitions and future capital
expenditures. Pending such uses, the net proceeds will be invested in
short-term, interest-bearing, investment-grade securities. The promoters
(including the dentist-owners of the Founding Affiliated Practices), officers
and directors of the Company will receive an aggregate of approximately $6.7
million out of the net proceeds of the Offering. Other than with respect to the
Affiliations, the Company currently has no agreement or understanding with
respect to any future affiliation. See "Risk Factors--Proceeds of Offering
Payable to Affiliates" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
The consideration being paid by the Company in connection with each
Affiliation was determined by negotiations between executive officers of the
Company not affiliated with any Founding Affiliated Practice and a
representative of that Founding Affiliated Practice. The Company used the same
valuation method to negotiate the consideration being paid to each of the
Founding Affiliated Practices, including the respective practices wholly owned
by Drs. Reed, Andress, Clarke, Greder, Kay and Yaros, which method was based
upon the Founding Affiliated Practice's gross revenue, net of certain operating
expenses, and the Company's assessment of growth potential. See "Certain
Transactions" for information concerning the identification of the owners of the
Founding Affiliated Practices and the respective amounts of cash being paid to
them out of the proceeds of the Offering and shares of Common Stock being issued
to them in connection with the Affiliations.
The indebtedness of the Founding Affiliated Practices to be repaid bears
interest at an average rate of 8.0% and would otherwise mature at various dates
through 2002.
DIVIDEND POLICY
It is the Company's current intention to retain earnings for the foreseeable
future to support operations and finance expansion. The payment of any future
dividends will be at the discretion of the Company's Board of Directors and will
depend upon, among other things, the Company's earnings, financial condition,
cash flow from operations, capital requirements, expansion plans, the income tax
laws then in effect, the requirements of Delaware law and restrictions that may
be imposed by the Company's future financing arrangements.
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DILUTION
The deficit in net tangible book value of the Company as of September 30,
1997 was approximately $(1.7) million, or $(0.95) per share of Common Stock, as
determined by dividing the tangible net worth of the Company (tangible assets
less total liabilities and the aggregate stated value of the Class A Preferred
and Class B Preferred) by the number of shares of Common Stock outstanding.
After giving effect to (i) the Affiliations and (ii) the sale by the Company of
2,500,000 shares of Common Stock offered at a price of $10.00 per share (the
midpoint of the estimated initial public offering price range) and the
application of the estimated net proceeds therefrom as set forth under "Use of
Proceeds," the net pro forma tangible book value of the Company as of September
30, 1997 would have been approximately $11.4 million, or $1.77 per share of
Common Stock. This represents an immediate increase in the net tangible book
value of $2.72 per share to existing stockholders consisting of a decrease of
$1.10 per share attributed to the assumption of net liabilities of the Founding
Affiliated Practices and the related cash distribution of approximately $6.4
million to promoters (which is the aggregate cash consideration to be
distributed in the Affiliations) and an increase of $3.82 per share relating to
the Offering. The deficit in pro forma net tangible book value immediately after
the Affiliations is $8.1 million, or $(2.05) per share. This is an immediate
dilution to new investors purchasing Common Stock in the Offering of $10.23 per
share. The following table illustrates the per share dilution to new investors
purchasing Common Stock in the Offering:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share(1).............................. $ 12.00
Historical deficit in net tangible book value................................. $ (0.95)
Decrease due to assumption of net liabilities and related cash distribution to
promoters................................................................... (1.10)
---------
Pro forma net tangible book value per share after the Affiliations............ (2.05)
Increase due to the Offering.................................................. $ 3.82
---------
Pro forma net tangible book value per share after the Affiliations and
Offering.................................................................... $ 1.77
---------
Dilution per share to initial public offering investors......................... $ 10.23
---------
---------
</TABLE>
- ------------
(1) Before deducting estimated underwriting discounts and expenses of the
Offering payable by the Company.
The following table sets forth, on a pro forma basis to give effect to the
Affiliations as of September 30, 1997, the number of shares of Common Stock
purchased from the Company, the total consideration to the Company and the
average price per share paid to the Company by existing stockholders and the new
investors purchasing shares from the Company in the Offering (before deducting
underwriting discounts and commissions and estimated offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- -------------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ---------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......................... 1,319,629 20.5% $ 726,000 3.7% $ 0.55
Stockholders receiving shares in connection
with the Affiliations........................ 2,622,269 40.7% (6,417,796)(1) (33.2)% $ (2.45)(1)
New investors.................................. 2,500,000 38.8% $ 25,000,000 129.5% $ 10.00
--------- ----- -------------- -----
Total...................................... 6,441,898 100.0% $ 19,308,204 100.0%
--------- ----- -------------- -----
--------- ----- -------------- -----
</TABLE>
- ------------
(1) Represents the cash distribution of approximately $6.4 million and the
aggregate historical book value of the assets to be acquired, net of
liabilities of the Founding Affiliated Practices to be assumed by the
Company (a net amount of approximately $(51,000)), in the Affiliations.
All of the calculations above exclude an aggregate of 671,667 shares of
Common Stock issuable upon exercise of stock options anticipated to be
outstanding on the date the Offering closes at an exercise price equal to the
initial public offering price per share under the 1997 Stock Compensation Plan
and 1,328,333 shares reserved for future issuance under the 1997 Stock
Compensation Plan. See "Management--1997 Stock Compensation Plan."
18
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and the capitalization of
the Company at September 30, 1997 (a) on a historical basis, (b) on a pro forma
basis, to give effect to the Affiliations and (c) on that pro forma basis, as
adjusted to give effect to the Offering and the use of the estimated net
proceeds therefrom as described under "Use of Proceeds." This table should be
read in conjunction with the unaudited Pro Forma Balance Sheet of Pentegra and
the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
----------------------------------------
HISTORICAL PRO FORMA AS ADJUSTED(1)
----------- ----------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt:
Distribution liability(2)................................................ $ -- $ 6,567 $ --
Current portion of long-term debt........................................ -- 746 --
----------- ----------- -------
Total short-term debt.................................................... $ -- $ 7,313 $ --
----------- ----------- -------
----------- ----------- -------
Long-term debt:
Long-term debt, net of current portion................................... -- 2,003 --
Redeemable Preferred Stock................................................. 1,089 1,089 --
Stockholders' equity (deficit):
Common Stock, 40,000,000 shares authorized; 1,756,667 shares issued and
outstanding, 3,941,898 shares issued and outstanding, pro forma, and
6,441,898 shares issued and outstanding, as adjusted(1)................ 18 20 6
Additional paid-in capital(3)............................................ 708 (5,712) 13,552
Accumulated deficit...................................................... (750) (750) (2,000)
----------- ----------- -------
Total stockholders' equity............................................. (24) (6,442) 11,558
----------- ----------- -------
Total capitalization................................................... $ 1,065 $ (3,350) $ 11,558
----------- ----------- -------
----------- ----------- -------
</TABLE>
- ---------
(1) Excludes 671,667 shares of Common Stock to become subject to option awards
that have been authorized pursuant to the 1997 Stock Compensation Plan. See
"Management--1997 Stock Compensation Plan."
(2) Includes approximately $6,367,000 for the cash distribution to promoters in
connection with the Affiliations (which is the aggregate cash consideration
to be paid in the Affiliations) and $200,000 payable in connection with the
Pentegra/Napili Transaction.
(3) The $(6,420,000) effect of the Affiliations on additional paid-in capital is
equal to the aggregate liabilities in excess of the aggregate historical
book value of the assets to be acquired (a net amount of approximately
$(51,000)), plus aggregate cash payments of approximately $6,367,000 to be
made to promoters as part of the consideration for the Affiliations, plus
the par value of the Common Stock to be issued in connection with the
Affiliations.
19
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS EXCEPT PER SHARE DATA)
Upon completion of the Offering and pursuant to the Affiliations, the
Company will acquire substantially all the tangible and intangible assets and
assume certain liabilities of the Founding Affiliated Practices. Due to the fact
that the Company has had no significant operations to date, no pro forma
statement of operations has been included in this Prospectus. The nature and
amount of costs to be incurred by the Company in connection with the management
services it will provide to the Founding Affiliated Practices may differ from
the costs historically incurred by the Founding Affiliated Practices. The
selected historical financial data of the Company should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical financial statements and the notes thereto
included in this Prospectus. The selected historical financial data of the
Company as of September 30, 1997 and for the period from inception, February 21,
1997, through September 30, 1997, set forth below, have been derived from the
audited financial statements of Pentegra Dental Group, Inc. included in this
Prospectus. Except as indicated, the following information does not reflect the
effects of the Offering, the Affiliations, the Share Exchange, the
Pentegra/Napili Transaction and the Repurchase and Redemption. For certain
information concerning the Affiliations, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Note 4 of Notes
to the Pentegra Dental Group, Inc. financial statements.
<TABLE>
<CAPTION>
FOR THE
PERIOD
FROM
INCEPTION
(FEBRUARY
21,
1997)
THROUGH
SEPTEMBER
30, 1997
--------
(UNAUDITED)
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.............................................. $ --
General and administrative expenses................ 411
Other expenses..................................... 339
--------
Total expenses................................. 750
--------
Net loss........................................... $ (750)
--------
--------
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------
HISTORICAL AS ADJUSTED(1)
----------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents(2)........................................................... $ 354 $ 9,471
Working capital (deficit).............................................................. (652) 8,586
Total assets........................................................................... 2,071 12,997
Redeemable preferred stock............................................................. 1,089 --
Stockholders' equity (deficit)......................................................... (24) 11,558
</TABLE>
- ------------
(1) As adjusted gives effect to (i) the Offering, (ii) the Affiliations, (iii)
the repayment of certain indebtedness of Pentegra and the Founding
Affiliated Practices, (iv) the Pentegra/Napili Transaction, (v) the Share
Exchange and (vi) the Repurchase and Redemption, as if such transactions had
occurred on September 30, 1997. See the Unaudited Pro Forma Balance Sheet of
Pentegra and the notes thereto included in this Prospectus.
(2) See "Use of Proceeds."
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS CONTAINS CERTAIN STATEMENTS OF A
FORWARD-LOOKING NATURE RELATING TO FUTURE EVENTS OR THE FUTURE FINANCIAL
PERFORMANCE OF THE COMPANY. SUCH STATEMENTS ARE ONLY PREDICTIONS AND THE ACTUAL
EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS,"
AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS. THE HISTORICAL RESULTS
SET FORTH IN THIS DISCUSSION AND ANALYSIS ARE NOT INDICATIVE OF TRENDS WITH
RESPECT TO ANY ACTUAL OR PROJECTED FUTURE FINANCIAL PERFORMANCE OF THE COMPANY.
THIS DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE PRO FORMA
BALANCE SHEET, THE FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO INCLUDED
IN THIS PROSPECTUS.
OVERVIEW
Although the Company has conducted no significant operations to date, it
will succeed to the business of Pentegra, Ltd. and Napili, which developed the
Pentegra Dental Program. In connection with the Affiliations, the Company will
acquire certain tangible and intangible assets and assume certain liabilities
of, and enter into Service Agreements with, the Founding Affiliated Practices.
Through those Service Agreements, the Company will be providing practice
management services to the Founding Affiliated Practices in return for
management service fees.
The expenses incurred by the Company in fulfilling its obligations under the
Service Agreements will be generally of the same nature as the operating costs
and expenses that were otherwise incurred by the Founding Affiliated Practices,
including salaries, wages and benefits of practice personnel (excluding dentists
and certain other licensed dental care professionals), dental supplies and
office supplies used in administering their practices and the office (general
and administrative) expenses of the practices. In addition to the operating
costs and expenses discussed above, the Company will be incurring personnel and
administrative expenses in connection with establishing and maintaining a
corporate office, which will provide management, administrative, marketing and
development and acquisition services to Affiliated Practices.
The Service Agreements with the professional corporations or associations to
be formed by the dentist-owners of the Founding Affiliated Practices have
initial terms of 40 years, subject to earlier termination under certain
circumstances. Pursuant to those Service Agreements, the Company will become the
exclusive manager and administrator of non-dental services relating to the
operation of the Founding Affiliated Practices, and will, among other things,
(i) administer the billing and collections for the Founding Affiliated
Practices, (ii) provide the necessary clerical, accounting and other non-dental
services to the Founding Affiliated Practices and (iii) provide facilities and
equipment for the Founding Affiliated Practices. The service fees payable by the
Founding Affiliated Practices to the Company under the Service Agreements are
based on fair market value of the services to be provided. Generally, the
service fees are computed based on (i) a percentage of revenues less operating
expenses, (ii) a percentage of revenues not to exceed a percentage of revenues
less operating expenses, (iii) a specific fixed service fee or (iv) some
combination of these. See "--Planned Operations" and "Business--Service
Agreements."
The Company does not participate in the negotiation of dentist compensation.
Under each Service Agreement, the Affiliated Practice will retain the
decision-making power and responsibility for, among other things, (i) hiring,
compensating and supervising dentists and other licensed dental professionals,
(ii) ensuring that dentists have the required licenses, credentials, approvals
and other certifications appropriate to the performance of their duties and
(iii) complying with federal and state laws, regulations and ethical standards
applicable to the practice of dentistry. Pursuant to the terms of the Service
Agreements, the Affiliated Practices will continue to provide dental services
and will be exclusively in control of all aspects of the practice of dentistry
and the provision of dental services. The Company will not engage in the
practice of dentistry.
21
<PAGE>
As a result of the Affiliations and upon completion of the Offering, the
dentist-owners of the Founding Affiliated Practices and certain officers and
directors of the Company will beneficially own approximately 57.4% of the
outstanding shares of Common Stock. See "Certain Transactions--Organization of
the Company" and "Principal Stockholders."
RESULTS OF OPERATIONS
PENTEGRA AND PII
Pentegra and PII have conducted no significant operations to date and will
not conduct significant operations until the Affiliations, the Pentegra/Napili
Transaction and the Offering are completed. The Company had no revenues and a
net loss of $750,000 for the period from inception, February 21, 1997, through
September 30, 1997. General and administrative expenses totalling approximately
$750,000 were incurred during the period from inception through September 30,
1997. The Company has incurred and will continue to incur various legal,
accounting, travel, personnel and marketing costs in connection with the
Affiliations and the Offering. Of these expenses, $1,450,000 is being funded
with proceeds from the issuances of the Common Stock, Class A Preferred and
Class B Preferred in the second quarter of 1997, and $350,000 is being funded
with proceeds from the issuance of $350,000 aggregate principal amount of 9.5%
promissory notes of the Company to four separate lenders in October and November
1997.
PLANNED OPERATIONS
The Company intends to complete the Affiliations and the Pentegra/Napili
Transaction concurrently with the closing of the Offering. Upon consummation of
the Affiliations, the Company will enter into a Service Agreement with each
Founding Affiliated Practice under which the Company will become the exclusive
manager and administrator of non-dental services relating to the operation of
the Founding Affiliated Practices. The following is a summary of the typical
form of Service Agreement the Company will enter into with each Founding
Affiliated Practice. The Company expects to enter into similar agreements with
Affiliated Practices in the future. The actual terms of the Service Agreements
may vary from the description below on a case-by-case basis, depending on
negotiations with the individual Founding Affiliated Practices and the
requirements of applicable laws and governmental regulations.
Each Service Agreement is for an initial term of 40 years, with automatic
extensions (unless specified notice is given) of five years. The Service
Agreement may be terminated by either party if the other party (i) files a
petition in bankruptcy (or other similar events occur) or (ii) defaults on the
performance of a material duty or obligation, which default continues for a
specified term after notice. In addition, the Service Agreement may be
terminated by the Company (i) if the Founding Affiliated Practice or a dentist
engages in conduct for which the dentist's license to practice dentistry is
revoked or suspended or is the subject of any restrictions or limitations by any
governmental authority to such an extent that he, she or it cannot engage in the
practice of dentistry or (ii) upon a breach by the dentist of the employment
agreement between the Founding Affiliated Practice and the dentist.
The management service fees (the "Service Fees") payable to the Company by
the Founding Affiliated Practices under the Service Agreements, together with
operating and non-operating expenses of each Affiliated Practice to be paid to
the Company pursuant to the Service Agreements, are payable monthly and consist
of various combinations of the following: (i) "Standard Service Agreement",
which provides for (a) a percentage (ranging from 30% to 40%) of the Affiliated
Practice's revenues related to dental services less operating expenses
associated with the operation of the Affiliated Practice or (b) a percentage
(16%) of the Affiliated Practice's dental service revenues, not to exceed a
percentage (35%) of the difference between those revenues and operating expenses
associated with the operation of the Affiliated Practice; or (ii) "Alternative
Service Agreement," which provides for the greater of (a) a percentage (not to
exceed 35%) of the Affiliated Practice's revenues related to dental services
less operating expenses associated with the operation of the Affiliated Practice
or (b) a specified fixed Service
22
<PAGE>
Fee. In addition, with respect to four of the Founding Affiliated Practices, the
Service Fees are based on fixed fees that are subject to renegotiation on an
annual basis.
Service Fees payable to the Company under clause (i)(a) above are payable by
38 of the Founding Affiliated Practices, located in each state in which the
Founding Affiliated Practices are located other than New York and California,
and are calculated by subtracting the operating expenses of the Founding
Affiliated Practice (including non-dental salaries, insurance, rent and other
non-dentist costs) from the net revenues of the Founding Affiliated Practice and
multiplying the resulting amount by 30%, 35% or 40%, depending on the terms of
the particular Service Agreement. One Founding Affiliated Practice located in
California will pay its Service Fee according to the formula set forth in clause
(i)(b) above, equal to the greater of 16% of its net revenues or 35% of the
difference between its net revenues and operating expenses. Service Fees to be
received by the Company under clause (ii)(b) above are payable by seven of the
Founding Affiliated Practices in Texas and will result in a minimum service fee
being received by the Company. The annual fixed fees payable by the four
Founding Affiliated Practices in New York are $66,009, $115,251, $83,579 and
$140,127 and will be subject to renegotiation each year based on the fair value
of the services to be received by those Founding Affiliated Practices from the
Company. On a monthly basis, the Company will calculate the Service Fee due from
each Founding Affiliated Practice pursuant to the terms of each Service
Agreement. In addition, if the costs related to providing dental services
pursuant to capitated managed care arrangements exceed the revenues received for
those services, the Affiliated Practice will remain responsible for reimbursing
the Company for all of the costs associated with providing those services, even
if no Service Fee is due to the Company under its Service Agreement.
Dentist compensation will be determined by the Affiliated Practices pursuant
to employment arrangements between the Affiliated Practices and the individual
dentists. The Company does not participate in the negotiation of dentist
employment compensation.
The Company will not engage in the practice of dentistry. To the extent that
a Founding Affiliated Practice, with the assistance of the Company pursuant to
its Service Agreement, increases its revenues and/ or decreases its operating
expenses, the Service Fees payable to the Company may increase. The Service Fees
for each Founding Affiliated Practice will be calculated individually and will
not be based on the operations of any other Founding Affiliated Practice.
It is anticipated that substantially all the Company's revenues will consist
of Service Fees and the operating expenses that the Affiliated Practices will
pay to the Company under the Service Agreements. Service Fees may be expected to
vary proportionately with the level of dental services provided by Founding
Affiliated Practices and future affiliations with additional Affiliated
Practices.
SERVICE FEE CALCULATION
The following table categorizes by the type of Service Agreement, the
historical 1996 patient revenues of the Founding Affiliated Practices and the
historical 1996 operating expenses excluding depreciation and
23
<PAGE>
dentists' salaries. It also demonstrates the calculation of the Service Fees
under each type of Service Agreement (in thousands):
<TABLE>
<CAPTION>
ALTERNATIVE SERVICE
STANDARD AGREEMENT FIXED FEE
SERVICE -------------------------- SERVICE
AGREEMENT PERCENTAGE(C) FIXED AGREEMENT TOTAL
----------- --------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Number of Founding Affiliated Practices..... 39 -- 7 4 50
----------- ----- --------- ----------- ---------
----------- ----- --------- ----------- ---------
Historical 1996 patient revenues of Founding
Affiliated Practices....................... $ 29,233 -- $ 6,059 $ 2,599 $ 37,891
Historical 1996 operating expenses of
Founding Affiliated Practices(a)........... 17,420 -- 4,269 1,393 23,082
----------- ----- --------- ----------- ---------
Historical 1996 operating income(a)....... $ 11,813 -- $ 1,790 $ 1,206 $ 14,809
--------- ----------- ---------
--------- ----------- ---------
Percentage of operating income under the
Service Agreements(b)...................... 35% 35% -- -- --
----------- -----
Percentage Service Fees based on operating
income..................................... $ 4,135 -- -- -- $ 4,135
----------- ---------
----------- ---------
Fixed Service Fees under terms of the
Service Agreements......................... $ 756 $ 405 $ 1,161
--------- ----------- ---------
--------- ----------- ---------
</TABLE>
- ---------
(a) Under the terms of the Service Agreements, operating expenses and operating
income exclude depreciation and the effects of dentists' salaries.
(b) Represents the percentage that, under 37 of the Standard Service Agreements
and all of the Alternative Service Agreements, will be applied to operating
income to calculate percentage-based Service Fees.
(c) All of the Company's Alternative Service Agreements would result in payment
under the fixed fee provision of the contract if patient revenues and
expenses were equal to historical revenues and expenses for the year ended
December 31, 1996.
Total fees payable to the Company under the Service Agreements will consist
of the sum of (i) the operating expenses that the Affiliated Practices will pay
the Company, (ii) the percentage-based Services Fees and (iii) the fixed Service
Fees.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash of approximately $354,000 at September 30, 1997. In
October and November 1997, the Company received an additional $350,000 through
the issuance of $350,000 aggregate principal amount of 9.5% promissory notes to
four lenders. In connection with the issuance of the 9.5% promissory notes, PII
issued an aggregate of 20,000 shares of its common stock to certain of those
lenders for cash consideration of $.01 per share and authorized the grant of
options to acquire 25,000 shares of Common Stock at the initial public offering
price. The Company anticipates receiving approximately $22.0 million, net of
underwriters' commissions and other offering costs, as proceeds from the
Offering. The Company will use the net proceeds of the Offering to pay (i) the
costs of the Offering not previously funded from the proceeds of the issuance of
capital stock and notes of the Company, (ii) the cash portion of the
consideration for the Affiliations of approximately $6.4 million, (iii) the
consideration for the Pentegra/ Napili Transaction of $200,000, (iv)
approximately $2.8 million in connection with the Repurchase and Redemption, (v)
approximately $2.7 million to retire certain indebtedness of the Founding
Affiliated Practices and (vi) approximately $350,000 to repay the aggregate
principal amount outstanding under the
24
<PAGE>
Company's 9.5% promissory notes. The remaining net proceeds will be used for
general corporate purposes, which are expected to include future acquisitions
and capital expenditures. The cost of implementing the Company's management
information systems is estimated to be approximately $550,000, including
enhanced microcomputer and related hardware in certain dental practice offices.
Approximately half of this amount has been paid with proceeds from the sale of
Class A Preferred and Class B Preferred, with the remainder to be paid from the
net proceeds of the Offering.
Management believes the net proceeds of the Offering, combined with the
Company's cash flows from operations, will be sufficient to fund planned capital
expenditures and ongoing operations of the Company through the end of 1998. The
Company is also seeking to establish a revolving bank credit facility and
intends to register an additional 1,500,000 shares of Common Stock under the
Securities Act following the Offering which, when combined with the Company's
cash resources, will be used in the Company's expansion program.
ACCOUNTING TREATMENT
In accordance with Staff Accounting Bulletin No. 48, "Transfers of
Nonmonetary Assets by Promoters or Shareholders" ("SAB 48"), the acquisition of
the assets and assumption of certain liabilities pursuant to the Affiliations
from certain promoters of the Company (the dentists who own the Founding
Affiliated Practices) will be accounted for by the Company at the transferors'
historical cost basis. The Common Stock being issued in the Affiliations will be
recorded at the historical net book value of the net assets being acquired, as
reflected on the books of the Founding Affiliated Practices. Cash consideration
paid to the promoters in the Affiliations of approximately $6.4 million and the
assumption of approximately $51,000 of net liabilities of the Founding
Affiliated Practices will be treated for accounting purposes as a dividend to
the promoters. See "Business--Summary of Terms of Affiliations" and "Certain
Transactions--Organization of the Company."
RECENT PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." SFAS No. 128 specifies the computation, presentation, and disclosure
requirements of earnings per share and supersedes Accounting Principles Board
Opinion No. 15, "Earnings Per Share." SFAS No. 128 requires a dual presentation
of basic and diluted earnings per share. Basic earnings per share, which
excludes the impact of common stock equivalents, replaces primary earnings per
share. Diluted earnings per share, which utilizes the average market price per
share as opposed to the greater of the average market price per share or ending
market price per share when applying the treasury stock method in determining
common stock equivalents, replaces fully diluted earnings per share. SFAS No.
128 is effective for both interim and annual periods ending after December 15,
1997.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," and SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information." SFAS No. 130 establishes standards for reporting and
displaying comprehensive income and its components in a full set of general
purpose financial statements. SFAS No. 131 establishes standards for reporting
segment information by public enterprises in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports to shareholders. Both of these statements
are effective for fiscal years beginning after December 15, 1997. The Company
believes implementation of SFAS Nos. 130 and 131 will not have a material effect
on its financial position, results of operations or cash flows.
25
<PAGE>
BUSINESS
OVERVIEW
Pentegra Dental Group, Inc. was recently formed to provide management,
administrative, development and other services to dental practices throughout
the United States. The Company's approach to dental practice management, the
Pentegra Dental Program, was developed by Dr. Omer K. Reed, the Chairman of the
Board of the Company, and is designed to increase revenues and lower costs at
Affiliated Practices while freeing the practicing dentists to focus on the
delivery of high-quality care. The Company will earn management service fees
under long-term service agreements with Affiliated Practices (the "Service
Agreements"). In most cases, service fees payable to the Company under the
Service Agreements represent a share of the Affiliated Practices' operating
profits, thereby providing incentives for the Company and the Affiliated
Practices to work together to maximize practice profitability. The Company will
also seek to grow by acquiring and affiliating with additional dental practices.
The Company has entered into definitive acquisition agreements and Service
Agreements with 50 Founding Affiliated Practices, which include 77 dentists and
63 dental offices located in 18 states. These dentists have practiced an average
of 21 years. Of these dentists, 68 are general dentists, one is a
prosthodontist, five are periodontists, one is a pedodontist and two are oral
surgeons. In addition, the Company will acquire from Dr. Reed the assets of a
consulting firm, Pentegra, Ltd., which was founded in 1988, and a seminar
company, Napili, which was founded in 1963. The clinical, administrative and
marketing training developed and provided by these companies to practicing
dentists and their teams are the foundation for the Pentegra Dental Program.
After completion of the Offering, the Pentegra Dental Program will be available
exclusively to Affiliated Practices.
The Company believes it has several advantages that would lead dental
practices to seek to affiliate with the Company: (i) the Company and the
Founding Affiliated Practices focus on providing traditional fee-for-service
dental care, which the Company believes is highly profitable and professionally
rewarding for dentists; (ii) the Pentegra Dental Program offers proven
techniques to increase practice profitability substantially; (iii) both the
Company and the Affiliated Practices will have incentives to work together to
maximize practice profitability; and (iv) affiliation with the Company will
enable Affiliated Practices to benefit from professional management techniques,
economies of scale in administrative and other functions, and enable affiliated
dentists to dedicate more time and effort towards the growth of their practices.
INDUSTRY
The Health Care Finance Administration ("HCFA") estimates that in 1995,
approximately $43 billion was spent in the United States on dental services.
HCFA projects annual dental expenditures to increase at an average annual rate
of six percent per year, reaching $79 billion in the year 2005. The Company
believes there are several factors that will drive growth in dental expenditures
in the United States, including (i) the aging of the population, which increases
the demand for restorative and maintenance procedures (E.G., crowns, bridges and
implants) that tend to be more profitable than routine procedures (E.G.,
cleanings and fillings); (ii) the increasing attention to dental health and
wellness, with greater emphasis on personal appearance, which increases the
demand for general dentistry services and, in particular, cosmetic dental
procedures (E.G., porcelain bonding and bleaching), which also tend to be more
profitable than routine procedures; and (iii) the increasing percentage of the
population covered by some form of dental insurance, which, according to the
National Center for Health Statistics, makes patients more likely to seek
treatment from their dentist.
Payments for dental services are made either directly by patients or by
third-party payors. Third-party payors primarily consist of private insurance
indemnity plans, preferred provider organizations ("PPOs") and dental health
maintenance organizations and other managed care programs ("DHMOs"). Private
indemnity insurance companies typically pay for a patient's dental care on a
fee-for-service basis, while PPO plans pay on a discounted fee-for-service
basis. DHMO plans typically pay on a per-person, per-
26
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month basis regardless of the level of service provided to the patient. In the
case of both PPOs and DHMOs, patients typically must pay on a fee-for-service
basis for any services outside the limited range of dental procedures covered.
According to the 1997 Mercer Consulting Group survey of Employer-Sponsored
Health Plans, approximately 86% of the respondents in that survey reported that
they offer their employees dental plans that pay for dental services on a
fee-for-service basis, while approximately 22% of the plans surveyed are PPO and
DHMO plans (I.E., discounted fee-for-service payments or capitated payments).
According to HCFA, only approximately four percent of all payments for dental
care are made under the Medicaid program (which provides limited coverage for
indigent children), with no coverage being provided by the Medicare program.
In a 1995 survey, the ADA reported that there were approximately 153,000
active dentists in the United States, approximately 88% of whom were practicing
either alone or with only one other dentist. In recent years, dentists have
begun to consolidate into affiliated groups and with practice management
organizations. Dentists who affiliate with practice management companies gain
several benefits, such as opportunities to achieve economies of scale, to
implement cost management techniques and to gain access to capital for new
equipment and other working capital needs.
BUSINESS STRATEGY
The Company's objective is to become a leader in providing dental practice
management services. In order to achieve this objective, the Company's strategy
includes the following elements:
- FOCUS ON TRADITIONAL FEE-FOR-SERVICE DENTAL CARE. According to the 1997
Mercer Consulting Group Survey of Employer-Sponsored Health Plans,
approximately 86% of the respondents in that survey reported that they
offer their employees dental plans that pay for dental services on a
fee-for-service basis. The Company believes that fee-for-service care is
high-quality, highly profitable and professionally rewarding for dentists.
- INCREASE PRODUCTIVITY AND PROFITABILITY OF AFFILIATED PRACTICES BY
IMPLEMENTING THE PENTEGRA DENTAL PROGRAM. The Pentegra Dental Program
involves implementing techniques designed to increase revenues and lower
costs, as well as methods to make the dentist and his or her practice team
more efficient in the delivery of dental care.
- LOWER OPERATING COSTS BY ACHIEVING ECONOMIES OF SCALE. The Company
believes that, as a result of its size and resources, it will be able to
provide Affiliated Practices with certain management functions at lower
cost than if the Affiliated Practices were to perform the services by
themselves.
- FREE THE DENTIST TO FOCUS MORE TIME ON THE PRACTICE OF DENTISTRY. The
Company will relieve practicing dentists of administrative tasks. The
Company believes its management and administrative support will
substantially reduce the amount of time affiliated dentists are required
to spend on administrative matters and enable them to dedicate more time
and effort toward the growth of their professional practices.
- GROW THROUGH ACQUISITIONS AND AFFILIATIONS OF ADDITIONAL DENTAL PRACTICES.
The Company will generally seek to affiliate with practices that have high
potential for future growth, particularly through implementation of the
Pentegra Dental Program, an established reputation for high-quality care
and a strategic fit either in an existing market or as an entry into a new
market.
SERVICES AND OPERATIONS
THE PENTEGRA DENTAL PROGRAM
The Company intends to implement the Pentegra Dental Program at each
Affiliated Practice. The Pentegra Dental Program was developed by Dr. Reed
through Pentegra, Ltd. and Napili. Napili was founded in 1963 and has conducted
technical and management seminars for over 15,000 practicing
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dentists, including many who have attended these seminars more than once. As a
result of demand by attendees of Napili seminars, Dr. Reed established Pentegra,
Ltd. in 1988 to provide hands-on, on-site training and services to small groups
of dentists. Shortly after completion of the Offering, Pentegra, Ltd. and Napili
will no longer operate independently and their services will be available
exclusively to Affiliated Practices.
The Company focuses on traditional fee-for-service practices, which generate
revenue by providing care to their established patient bases and typically grow
through patient referrals. The Company believes that the average dentist has the
skills necessary to diagnose and provide appropriate care to patients, but many
of them have not developed the skills needed to obtain patient acceptances of,
and commitments to, the treatment plans. As a result, a significant amount of
recommended care may not be completed, with correspondingly lower revenues to
the dentists.
The Pentegra Dental Program is based on a cooperative approach that
emphasizes patient wellness and involves the dentist and his or her patient
mutually agreeing on a program to achieve and maintain optimal oral health. The
Company will provide seminars and on-site training and support to assist
affiliated dentists (who will control the practice of dentistry at Affiliated
Practices) and their teams to communicate effectively with each patient
regarding the type and value of care needed, obtain the patient's commitment to
a treatment plan and then implement the agreed-upon treatment plan. An initial
on-site consulting and training session will be provided to Affiliated Practices
lasting from one to three days, with subsequent sessions provided as necessary.
At each initial session, the Company will perform an analysis that includes
on-site observation of the dental practice, monitoring of the clinical staff and
patient flow, as well as a review of the charting and record documentation of
the care provided. The Company and the Affiliated Practices will monitor the
patients' treatment plans by using active recall systems to ensure that
scheduled treatments are actually performed. The Pentegra Dental Program
stresses quality of care and personal attention, both of which the Company
believes are highly valued by patients and help achieve treatment plan
acceptance. The Company intends to develop and maintain a statistical database
for each Affiliated Practice to define and measure the standard of care and
assure that the desired standards are being achieved.
The Pentegra Dental Program also analyzes and rationalizes fee structures to
increase profitability. The Company believes that typical fee structures do not
accurately reflect all direct and indirect costs of various procedures. In order
to address this, the Company will use time-related cost allocation models to
recommend fee structures for Affiliated Practices that are designed to reflect
the true cost of procedures and, hence, increase profitability.
In addition, the Pentegra Dental Program focuses on increasing the
productivity of the dentist and his or her team. The Company will seek to
increase hygienic use and production at the Affiliated Practices. A number of
dental services can be provided by hygiene teams with only limited involvement
by the dentist, thereby enabling dentists to use their extra time on higher
margin procedures requiring greater expertise and skill. The Company will also
monitor the Affiliated Practices' patient scheduling and time spent with
patients, and will provide office design services, in order to increase
utilization of existing dental equipment and personnel.
MANAGEMENT INFORMATION SYSTEMS
The Company will utilize an integrated server-based information system to
track important operational and financial data related to each Affiliated
Practice's performance. The Company's management information system will enable
the Company to collect from each Affiliated Practice, on a daily basis, data on
patients seen, number and type of procedures performed, billing and collections,
and other data needed for financial reporting and analysis. The Company will
then compile and analyze this data in order to promote efficiency and assure
high quality care at Affiliated Practices, as well as maintain necessary
financial controls. The Company's management information system will also enable
the Company to
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centralize certain functions, such as purchasing, accounts payable and payroll
processing, and achieve economies of scale.
The centralized data repository of the Company's management information
system has been completed. The Company is currently in the process of refining
and testing the interfacing of its management information system with beta sites
at selected Founding Affiliated Practices. The Company has successfully
completed testing to ensure access to the Company's data repository via the
internet at the beta sites, but has not yet completed testing of the entry and
retrieval of statistical data into the data repository from the beta sites. The
Company expects its integrated system to be operational at all of the Founding
Affiliated Practices at the closing of the Offering, and will be installed
promptly at all future Affiliated Practices as they affiliate with the Company.
Any significant delay or increase in expense associated with the conversion and
integration of management information systems used by Affiliated Practices could
have a material adverse effect on the successful implementation of the Company's
expansion strategy. In addition, the Company will have some systems that will
remain decentralized for at least some time, such as cash collections.
Accordingly, the Company will rely on local staff for certain functions,
including transferring cash from the Affiliated Practices to the Company.
OTHER PRACTICE MANAGEMENT SERVICES
The Company will provide other practice management services to the
Affiliated Practices, including staffing, general business and professional
dental education and training to affiliated dentists, dental hygenists and
office staff, employee benefits administration, advertising and other marketing
support and, where permitted by applicable law, dentist recruiting. This
management and administrative support should substantially reduce the amount of
time affiliated dentists are required to spend on administrative matters and
enable them to dedicate more time and effort toward the growth of their
professional practices. In addition, the Company expects to be able to
negotiate, on behalf of Affiliated Practices, discounts on, among other things,
dental and office supplies, health and malpractice insurance and equipment. The
Company does not currently intend to enter into any agreements with third-party
payors.
In certain markets, the Company may assist Affiliated Practices in securing
reimbursement contracts from third-party payors. In those situations, the
Company's role will be to negotiate and administer the contracts on behalf of
the Affiliated Practices.
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LOCATIONS
Upon consummation of the Affiliations, the Company will provide management
services to the Founding Affiliated Practices, with offices in the following
states:
<TABLE>
<CAPTION>
NUMBER OF
-------------------------------
STATE OFFICES DENTISTS CITIES
- ------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Alaska............................................................. 1 1 1
Arizona............................................................ 6 7 4
California......................................................... 1 1 1
Colorado........................................................... 4 6 4
Florida............................................................ 3 3 2
Louisiana.......................................................... 1 1 1
Maine.............................................................. 1 1 1
Maryland........................................................... 1 1 1
Massachusetts...................................................... 1 2 1
Michigan........................................................... 1 1 1
Nebraska........................................................... 2 2 1
New Mexico......................................................... 1 2 1
New York........................................................... 4 4 3
North Dakota....................................................... 1 1 1
Oregon............................................................. 1 1 1
Texas.............................................................. 31 40 12
Washington......................................................... 2 2 2
Wisconsin.......................................................... 1 1 1
--------- --------- ---------
Totals........................................................... 63 77 39
--------- --------- ---------
--------- --------- ---------
</TABLE>
All office facilities are leased, in some cases from the owner of the
Affiliated Practice using the facility. Pursuant to its Service Agreements, the
Company will provide all the office facilities (which it intends to lease),
dental equipment and furnishings to the Affiliated Practices.
SUMMARY OF TERMS OF AFFILIATIONS
The aggregate consideration that will be paid by Pentegra to the promoters
consists of (i) approximately $6.4 million in cash and (ii) shares of Common
Stock having a value of approximately $26.2 million, based on the initial public
offering price (2,622,269 shares of Common Stock, based on an assumed initial
public offering price of $10.00 per share). The number of shares to be issued in
connection with the Affiliations will decrease if the initial public offering
price is higher, and will increase if the initial public offering price is
lower, than $10.00 per share. For example, an aggregate of 2,383,881 shares of
Common Stock would be issued to the dentist-owners of the Founding Affiliated
Practices (all of whom are promoters of the Company) if that price is $11.00 per
share, while an aggregate of 2,913,631 shares of Common Stock would be issued to
those persons if that price is $9.00 per share. The Company will also assume
certain indebtedness of the Founding Affiliated Practices of approximately $2.7
million. Pentegra will acquire substantially all the assets necessary to operate
the business of each of the Founding Affiliated Practices, except as limited by
applicable restrictions on the corporate practice of dentistry. See Note 4 of
Notes to the Pentegra Dental Group, Inc. Financial Statements and "--Government
Regulation." The assets to be acquired include furniture, fixtures, computer
equipment, dental chairs, lights, autoclaves, mixers, vacuum and suction
systems, cabinets, hand instruments and hand pieces of each Founding Affiliated
Practice. Pentegra will also acquire the intangible assets of each Founding
Affiliated Practice and will employ the non-professional staff of each Founding
Affiliated Practice. Prior to consummation of the Offering, each dentist-owner
who owns a Founding Affiliated Practice will form a new professional corporation
or association that will be a party to a Service Agreement, and the Company will
own no interest in those professional corporations or associations. In the event
of a breach of the Service Agreement by an Affiliated Practice, the Company will
have the right to designate a dentist to purchase the ownership interests of the
applicable professional corporation or association.
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The consideration being paid by Pentegra for each Founding Affiliated
Practice was determined by negotiations between executive officers of Pentegra
not affiliated with any Founding Affiliated Practice and a representative of
that Founding Affiliated Practice. Pentegra used valuation methods to negotiate
the consideration being paid to each of the Founding Affiliated Practices,
including the respective practices wholly owned by Drs. Reed, Andress, Clarke,
Greder, Kay and Yaros, which methods were based upon the Founding Affiliated
Practice's gross revenue, net of certain operating expenses, and the Company's
assessment of growth potential.
The closing of each Affiliation is subject to customary conditions. These
conditions include, among others, the accuracy, on the closing date of the
Affiliations, of the representations and warranties made by the Founding
Affiliated Practices and their stockholders and by the Company; the performance
of each of their respective covenants included in the agreements relating to the
Affiliations; and the absence of any material adverse change in the results of
operations, financial condition or business of each Founding Affiliated
Practice.
Any Founding Affiliated Practice's acquisition agreement may be terminated,
under certain circumstances, prior to the closing of the Offering: (i) by the
mutual consent of Pentegra and the Founding Affiliated Practice; (ii) if the
Offering and the acquisition of that Founding Affiliated Practice are not closed
by March 31, 1998; or (iii) by the Founding Affiliated Practice or Pentegra if a
material breach or default is made by the other party in the observance or in
the due and timely performance of any of the covenants, agreements or conditions
contained in the acquisition agreement.
SERVICE AGREEMENTS
Upon consummation of the Affiliations, the Company will enter into a Service
Agreement with each Founding Affiliated Practice under which the Company will
become the exclusive manager and administrator of non-dental services relating
to the operation of the Founding Affiliated Practices. The following is intended
to be a brief summary of the typical form of Service Agreement the Company will
enter into with each Founding Affiliated Practice. The Company expects to enter
into similar agreements with Affiliated Practices in the future. The actual
terms of the various Service Agreements vary from the description below on a
case-by-case basis, depending on negotiations with the individual Founding
Affiliated Practices and the requirements of applicable law and governmental
regulations.
The Service Fees payable to the Company by the professional corporations or
associations to be formed by the dentist-owners of the Founding Affiliated
Practices under the Service Agreements are based on the fair market value, as
determined in arm's-length negotiations, of the nature and amount of services to
be provided. Those Affiliated Practices that have revenues greater than the
average amount of revenues generated by the Affiliated Practices will typically
require more administrative and other services from the Company than those
Affiliated Practices with lower than average revenues. Such fees, together with
reimbursement for operating and non-operating expenses of each Affiliated
Practice to be paid by the Company pursuant to the Service Agreements, are
payable monthly and consist of various combinations of the following: (i) a
percentage (ranging from 30% to 40%) of the Affiliated Practice's revenues
related to dental services less operating expenses associated with the operation
of the Affiliated Practice; (ii) a percentage (16%) of the Affiliated Practice's
dental service revenues, not to exceed a percentage (35%) of the difference
between those revenues and operating expenses associated with the operation of
the Affililated Practice; or (iii) the greater of (a) a percentage (not to
exceed 35%) of the Affiliated Practice's revenues related to dental services
less operating expenses associated with the operation of the Affiliated Practice
or (b) a specified fixed fee. In addition, with respect to four of the Founding
Affiliated Practices, the Service Fees are based on fixed fees that are subject
to renegotiation on an annual basis. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Results of Operations--Planned
Operations."
Pursuant to each Service Agreement, the Company will, among other things,
(i) act as the exclusive manager and administrator of non-dental services
relating to the operation of the Founding Affiliated
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Practice, subject to certain matters reserved to the Founding Affiliated
Practice, (ii) administer the billing of patients, insurance companies and other
third-party payors and collect on behalf of the Founding Affiliated Practice the
fees for professional dental and other services and products rendered or sold by
the Founding Affiliated Practice, (iii) provide, as necessary, clerical,
accounting, payroll, legal, bookkeeping and computer services and personnel,
information management, printing, postage and duplication services and
transcribing services, (iv) supervise and maintain custody of substantially all
files and records (other than patient records if prohibited by applicable law),
(v) provide facilities, equipment and furnishings for the Founding Affiliated
Practice, (vi) order and purchase inventory and supplies as reasonably requested
by the Founding Affiliated Practice and (vii) implement, in consultation with
the Founding Affiliated Practice, public relations or advertising programs.
Pursuant to each Service Agreement, the respective Founding Affiliated
Practice retains the decision-making power and responsibility for, among other
things, (i) hiring, compensating and supervising dentist-employees and other
licensed dental professionals, (ii) ensuring that dentists have the required
licenses, credentials, approvals and other certifications appropriate for the
performance of their duties and (iii) complying with federal and state laws,
regulations and ethical standards applicable to the practice of dentistry. In
addition, the Founding Affiliated Practice will be exclusively in control of all
aspects of the practice of dentistry and the provision of dental services.
Each Service Agreement is for an initial term of 40 years, with automatic
extensions (unless specified notice is given) of five years. The Service
Agreement may be terminated by either party if the other party (i) files a
petition in bankruptcy or other similar events occur or (ii) defaults on the
performance of a material duty or obligation, which default continues for a
specified term after notice. In addition, the Service Agreement may be
terminated by the Company (i) if the Founding Affiliated Practice or a dental
employee engages in conduct for which the dental employee's license to practice
dentistry is revoked or suspended or is the subject of any restrictions or
limitations by any governmental authority to such an extent that he, she or it
cannot engage in the practice of dentistry or (ii) upon a breach by the dentist
of the employment agreement between the Founding Affiliated Practice and the
dentist.
The Service Agreement requires the Founding Affiliated Practice to enforce
the employment agreements between the Founding Affiliated Practice and the
dentists associated with the Founding Affiliated Practice (the "Dentist
Employment Agreements"). If the Founding Affiliated Practice does not enforce
such employment agreement, the Company may, at its option, require the Founding
Affiliated Practice to either assign (i) such employment agreement or (ii) the
rights to enforce the covenant not to compete set forth therein to the Company
or its designee.
The Founding Affiliated Practice is responsible for obtaining professional
liability insurance for the employees of the Founding Affiliated Practice and
the Company is responsible for obtaining general liability and property
insurance for the Founding Affiliated Practice.
Upon termination of a Service Agreement, the Founding Affiliated Practice
has the option to purchase and assume, and the Company has the option to require
the Founding Affiliated Practice to purchase and assume, the assets and
liabilities related to the Founding Affiliated Practice at the fair market value
thereof, except in certain circumstances where the Founding Affiliated Practice
or the Company, as applicable, was in breach of the Service Agreement.
DENTIST AGREEMENT
Each dentist who has an ownership interest in a Founding Affiliated Practice
will enter into a dentist agreement, which provides the Company such dentist's
guarantee (for the initial five years and for so long thereafter as he or she
owns any interest in the Founding Affiliated Practice) of the Founding
Affiliated Practice's obligations under the applicable Service Agreement. In
addition, such agreement provides that the dentist may not sell his or her
ownership interest during the dentist's five-year employment term without the
Company's prior written consent. In the event of a default under the Service
Agreement by the Founding Affiliated Practice, the dentist agreement provides
that the Company may, at its option, require
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the Founding Affiliated Practice to convey its patient records and the capital
stock of the Founding Affiliated Practice to the Company's authorized designee,
who, in any such case, the Company anticipates will be a dentist affiliated with
an Affiliated Practice.
DENTIST EMPLOYMENT AGREEMENTS
Upon consummation of the Affiliations, each Founding Affiliated Practice
will be a party to a Dentist Employment Agreement with each dentist owner,
including the dentist who owns such Founding Affiliated Practice. The Dentist
Employment Agreements with dentists who will receive cash or Common Stock in the
Affiliations are for an initial term of five years and continue thereafter on a
year-to-year basis until terminated under the terms of the agreements. The
Dentist Employment Agreements provide that the employee dentist will not compete
with the Affiliated Practice during the term of the agreement and following the
termination of the agreement for a term of two years in a specified geographical
area. If employment of a dentist is terminated during the initial five-year term
without the consent of Pentegra for any reason other than the dentist's death or
disability or the occurrence of certain events outside the dentist's control, an
event of default will occur under the Service Agreement. In certain
jurisdictions a covenant not to compete may not be enforceable under certain
circumstances. See "Risk Factors-- Reliance on Affiliated Practices and
Dentists."
COMPETITION
The Company anticipates facing substantial competition from other companies
to establish affiliations with additional dental practices. The Company is aware
of several publicly traded dental practice management companies that have
operations in jurisdictions where one or more Founding Affiliated Practices
conduct business (including Castle Dental Centers, Inc., Monarch Dental
Corporation, Coast Dental Services, Inc., Gentle Dental Service Corp., Apple
Orthodontix, Inc., OrthAlliance, Inc. and Orthodontic Centers of America, Inc.)
and several companies pursuing similar strategies in other segments of the
health care industry. Certain of these competitors have greater financial and
other resources than the Company and have operations in areas where the Company
may seek to expand in the future. Additional companies with similar objectives
are expected to enter the Company's markets and compete with the Company. In
addition, the business of providing dental services is highly competitive in
each market in which the Company will operate. Each of the Founding Affiliated
Practices faces local competition from other dentists, pedodontists and other
providers of specialty dental services (such as periodontists, orthodontists and
oral surgeons), some of whom have more established practices. There can be no
assurance that the Company or the Affiliated Practices will be able to compete
effectively with their respective competitors, that additional competitors will
not enter their markets or that additional competition will not have a material
adverse effect on the Company or the Affiliated Practices.
EMPLOYEES
As of December 1, 1997, the Company employed three persons. Upon
consummation of the Affiliations, the Company expects that it will have
approximately 390 employees, of which approximately 15 will be employed at the
Company's headquarters in Phoenix, Arizona or at the Company's regional office
in Houston, Texas, and approximately 375 will be employed at the locations of
the Founding Affiliated Practices. None of the Company's employees is, or upon
consummation of the Affiliations will be, represented by collective bargaining
agreements. The Company considers its employee relations to be good.
LITIGATION AND INSURANCE
The Affiliated Practices provide dental services to the public and are
exposed to the risk of professional liability and other claims. In recent years,
dentists have become subject to an increasing number of lawsuits alleging
malpractice and related legal theories. Some of these lawsuits involve large
claims and significant defense costs. Any suits or claims involving the Company
or dentists at the Affiliated Practices, if successful, could result in
substantial damage awards to the claimants that may exceed the limits of any
applicable insurance coverage. Although the Company does not control the
practice of
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dentistry by the Affiliated Practices, it could be asserted that the Company
should be held liable for malpractice of a dentist employed by an Affiliated
Practice. Each Affiliated Practice has undertaken to comply with all applicable
regulations and legal requirements, and the Company maintains liability
insurance for itself. There can be no assurance, however, that a future claim or
claims will not be successful or, if successful, will not exceed the limits of
available insurance coverage or that such coverage will continue to be available
at acceptable costs.
The Company is currently not a party to any claims, suits or complaints. The
Company may become subject to certain pending claims (each of which is an
ordinary routine proceeding incidental to the business of the applicable
Founding Affiliated Practice) as the result of successor liability in connection
with the Affiliations; however, it is management's opinion that the ultimate
resolution of those claims will not have a material adverse effect on the
financial position, operating results or cash flows of the Company.
The Founding Affiliated Practices have maintained professional liability
insurance coverage, generally on a claims-made basis. Such insurance provides
coverage for claims asserted when the policy is in effect regardless of when the
events that caused the claim occurred. The Company intends to acquire similar
coverage after the closing of the Affiliations, since the Company, as a result
of the Affiliations, will in some cases succeed to the liabilities of the
Founding Affiliated Practices. Therefore, claims may be asserted against the
Company after the closing of Affiliations for events that occurred prior to such
closing.
GOVERNMENT REGULATION
The dental services industry is regulated extensively at both the state and
federal levels. Regulatory oversight includes, but is not limited to,
considerations of fee-splitting, corporate practice of dentistry and state
insurance regulation.
CORPORATE PRACTICE OF DENTISTRY AND FEE-SPLITTING RESTRICTIONS
The laws of many states, including all of the states in which the Founding
Affiliated Practices are located other than New Mexico and Wisconsin, prohibit
business corporations such as the Company from engaging in the practice of
dentistry or employing dentists to practice dentistry. The specific restrictions
against the corporate practice of dentistry, as well as the interpretation of
those restrictions by state regulatory authorities, vary from state to state.
The restrictions are generally designed to prohibit a non-dental entity (such as
the Company) from controlling the professional assets of a dental practice (such
as patient records and payor contracts), employing dentists to practice
dentistry (or, in certain states, employing dental hygienists or dental
assistants) or controlling the content of a dentist's advertising or
professional practice. The laws of many states, including all of the states in
which the Founding Affiliated Practices are located other than Alaska, Maine,
Massachusetts, New Mexico and Wisconsin, also prohibit dentists from sharing
professional fees with non-dental entities. State dental boards do not generally
interpret these prohibitions as preventing a non-dental entity from owning
non-professional assets used by a dentist in a dental practice or providing
management services to a dentist for a fee, provided certain conditions are met.
The Company believes that its operations will not contravene any restriction on
the corporate practice of dentistry. There can be no assurance, however, that a
review of the Company's business relationships by courts or regulatory
authorities will not result in determinations that could prohibit or otherwise
adversely affect the operations of the Company or that the regulatory
environment will not change, requiring the Company to reorganize or restrict its
existing or future operations. The laws regarding fee-splitting and the
corporate practice of dentistry and their interpretation are enforced by
regulatory authorities with broad discretion. There can be no assurance that the
legality of the Company's business or its relationship with the Affiliated
Practices will not be successfully challenged or that the enforceability of the
provisions of any Service Agreement will not be limited. The dentists associated
with the Affiliated Practices must possess a license from the applicable state
Board of Dental Examiners and a permit from the U.S. Drug Enforcement Agency.
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FRAUD AND ABUSE LAWS AND RESTRICTIONS ON REFERRALS AND SELF-REFERRALS
Many states in which the Founding Affiliated Practices are located,
including California, Florida, Maine, Maryland, Michigan, New York, Texas and
Washington, have fraud and abuse laws that, in many cases, apply to referrals
for items or services reimbursable by any insurer, not just by Medicare and
Medicaid. A number of states, including many of the states in which the Founding
Affiliated Practices are located, also impose significant penalties for
submitting false claims for dental services. In addition, most states in which
the Founding Affiliated Practices are located, including Alaska, Arizona,
California, Florida, Louisiana, Maine, Maryland, Michigan, New York, Texas and
Washington, have laws prohibiting paying or receiving any remuneration, direct
or indirect, that is intended to induce referrals for health care items or
services, including dental items and services. Many states in which the Founding
Affiliated Practices are located either prohibit or require disclosure of
self-referral arrangements and impose penalties for the violation of these laws.
Many states, including Alaska, Florida and Maine, limit the ability of a person
other than a licensed dentist to own or control equipment or offices used in a
dental practice. Some of these states allow leasing of equipment and office
space to a dental practice under a bona fide lease, if the equipment and office
remain under the control of the dentist. The Service Agreements that will be
entered into by the Company with respect to Affiliated Practices in Alaska,
Florida and Maine will provide that equipment and offices owned or leased by the
Company and used at an Affiliated Practice will remain under the exclusive
control of the dentists employed by that Affiliated Practice.
ADVERTISING RESTRICTIONS AND LIMITATIONS ON DELEGATION
Some states prohibit the advertising of dental services under a trade or
corporate name. Some states, including Texas, require all advertisements to be
in the name of the dentist. A number of states also regulate the content of
advertisements of dental services and the use of promotional gift items. In
addition, many states impose limits on the tasks that may be delegated by
dentists to hygienists and dental assistants. These laws and their
interpretations vary from state to state and are enforced by the courts and by
regulatory authorities with broad discretion.
INSURANCE REGULATION
There are certain state insurance regulatory risks associated with the
Company's anticipated role in negotiating and administering managed care
contracts on behalf of the Affiliated Practices. The application of state
insurance laws to third-party payor arrangements, other than fee-for-service
arrangements, is an unsettled area of law with little guidance available. State
insurance laws are subject to broad interpretation by regulators and, in some
states, state insurance regulators may determine that the Company or the
Affiliated Practices are engaged in the business of insurance because of the
capitation features (or similar features under which an Affiliated Practice
assumes financial risk) that may be contained in managed care contracts. In the
event that the Company or an Affiliated Practice is determined to be engaged in
the business of insurance, the Company or the Affiliated Practice could be
required to either seek licensure as an insurance company or change the form of
its relationships with the third-party payors. There can be no assurance that
the Company's operations would not be adversely affected if the Company or any
of the Affiliated Practices were to become subject to state insurance
regulations.
HEALTH CARE REFORM
The United States Congress has considered various types of health care
reform, including comprehensive revisions to the current health care system. It
is uncertain what legislative proposals, if any, will be adopted in the future
or what actions federal or state legislatures or third-party payors may take in
anticipation of or in response to any health care reform proposals or
legislation. There can be no assurance that applicable federal or state laws and
regulations will not change or be interpreted in the future either to restrict
or adversely affect the Company's relationships with dentists or the operation
of Affiliated Practices.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
As required by the Company's Bylaws, after the closing of the Offering, a
majority of the Company's Board of Directors will be dentists who are affiliated
with Affiliated Practices. The following table sets forth certain information
concerning the Company's directors, the nine persons nominated to become
directors on the closing of the Offering and the executive officers of the
Company (ages are as of December 1, 1997):
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- ----------------------------------------------------------------
<S> <C> <C>
Omer K. Reed, D.D.S.................... 65 Chairman of the Board and Clinical Officer
Gary S. Glatter........................ 44 President, Chief Executive Officer and Director
Sam H. Carr(1)......................... 41 Senior Vice President, Chief Financial Officer and Director
James L. Dunn, Jr.(2).................. 35 Senior Vice President, Chief Development Officer and Director
John G. Thayer......................... 43 Senior Vice President and Chief Operating Officer
Kimberlee K. Rozman.................... 37 Senior Vice President, General Counsel and Secretary
Ronnie L. Andress, D.D.S.(1)........... 42 Director
J. Michael Casas....................... 35 Director
James H. Clarke, Jr., D.D.S.(1)........ 49 Director
Ronald E. Geistfeld, D.D.S.(1)......... 63 Director
Allen M. Gelwick(2).................... 38 Director
Mack E. Greder, D.D.S.(1).............. 53 Director
Roger Allen Kay, D.D.S.(1)............. 52 Director
Gerald F. Mahoney(1)................... 53 Director
Anthony P. Maris(1).................... 63 Director
George M. Siegel....................... 59 Director
Ronald M. Yaros, D.D.S.(1)............. 51 Director
</TABLE>
- ---------
(1) Appointment as a director will become effective upon the closing of the
Offering.
(2) Each of Mr. Dunn and Mr. Gelwick intends to resign as a director upon the
closing of the Offering.
OMER K. REED, D.D.S. has served as the Company's Chairman of the Board and
Clinical Officer since May 1997. He founded Pentegra, Ltd. in 1988 and Napili in
1963, and is a practicing dentist with one of the Founding Affiliated Practices.
Since inception, Pentegra, Ltd. and Napili have provided comprehensive
management and consulting services to dental practices around the nation. In
1965, Dr. Reed founded the CeramDent Laboratory and he has maintained a private
dental practice in Phoenix since 1959. He has held associate professorships in
the Departments of Ecological Dentistry at the University of North Carolina,
Chapel Hill (1978-1988) and the University of Minnesota (1982-1991), and has
lectured extensively around the world on various subjects related to the
practice of dentistry. Dr. Reed also serves on the Board of Directors of Century
Companies of America, CUNA Mutual Insurance Group and the American Volunteer
Medical Team. Pursuant to the terms of his employment agreement with the
Company, the Company has undertaken to use its best efforts to elect Dr. Reed as
a director of the Company.
GARY S. GLATTER has served as the Company's President, Chief Executive Officer
and a Director since May 1997. From January 1994 to March 1997, he was President
and Chief Operating Officer of H.E.R.C. Products Incorporated, a public company
engaged in manufacturing and selling chemical rehabilitation products for water
distribution systems. From 1989 until 1993, Mr. Glatter served as President and
Chief Executive Officer of Classic Properties, a New York-based real estate
company. Pursuant to the terms of his employment agreement with the Company, the
Company has undertaken to use its best efforts to elect Mr. Glatter as a
director of the Company.
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<PAGE>
SAM H. CARR has served as the Company's Senior Vice President and Chief
Financial Officer since September 1997. From September 1996 until August of
1997, Mr. Carr served as Vice President--Finance and Corporate Development of
Ankle & Foot Centers of America, LLP, a podiatry practice management company.
From February 1995 until July 1996, Mr. Carr was a Senior Manager with Arthur
Andersen LLP. Prior thereto, Mr. Carr was Chief Financial Officer of
Columbia/HCA's Bellaire Hospital in Houston, Texas from January 1994 until
January 1995, and Vice President of Finance of St. Vincent Hospital in Santa Fe,
New Mexico from 1990 until 1994. Mr. Carr is a certified public accountant.
Pursuant to the terms of his employment agreement with the Company, the Company
has undertaken to use its best efforts to elect Mr. Carr as a director of the
Company.
JAMES L. DUNN, JR. has served as the Company's Senior Vice President and Chief
Development Officer since July 1997 and as a Director since March 1997. Since
1987, Mr. Dunn has been an attorney practicing as a sole practitioner in
Houston, Texas. His legal practice is focused on providing services to members
of the dental community. He has been actively involved in the valuation and sale
of dental practices over the past five years. In 1995, Mr. Dunn was appointed to
the Texas Medical Disclosure Panel, the body that determines which dental
procedures require informed consent. Mr. Dunn is a member of the American
Society of Pension Actuaries and is a certified public accountant.
JOHN G. THAYER has served as the Company's Senior Vice President and Chief
Operating Officer since March 1997. Prior thereto, Mr. Thayer was Managing
General Partner of England and Company, a public accounting firm he co-founded
in 1983, which provides accounting and practice management counseling to health
care professionals in the Texas Gulf Coast area. In 1994, he co-founded Medtek
Management, Inc., a privately held management information company specializing
in the data processing needs of health care professionals.
KIMBERLEE K. ROZMAN has served as the Company's Senior Vice President, General
Counsel and Secretary since July 1997. Prior thereto, she served as Vice
President, Senior Counsel (January to July 1997) and Associate General Counsel
(1996) of Physicians Resource Group, Inc., a public company engaged in providing
ophthalmic practice management services. From 1990 to 1996, Ms. Rozman was an
associate with the law firm of Jackson Walker L.L.P.
RONNIE L. ANDRESS, D.D.S. has been engaged in the private practice of dentistry
in Freeport, Texas since 1995 and is President of Ronnie L. Andress, D.D.S.,
Inc., one of the Founding Affiliated Practices. Prior to 1995, Dr. Andress was
engaged in the private practice of dentistry in Houston, Texas for over 12
years.
J. MICHAEL CASAS has been the President of Gustavia Investments, L.L.C. (a newly
organized venture capital firm) since October 1997. Prior thereto, he served as
a Vice President of Physicians Resource Group, Inc. from June 1995 to October
1997. From October 1991 to June 1995, Mr. Casas served as Administrator of Texas
Eye Institute Assoc., a comprehensive eye care provider in the greater Houston,
Texas area.
JAMES H. CLARKE, JR., D.D.S. has been engaged in the private practice of
dentistry in Houston, Texas since 1974 and is President of James H. Clark, Jr.,
D.D.S., Inc., one of the Founding Affiliated Practices.
RONALD E. GEISTFELD, D.D.S. is Professor Emeritus at the University of Minnesota
School of Dentistry, where he has taught since 1982. Dr. Geistfeld also
maintained a part-time dental practice in Minnesota from 1973 to 1992. He is a
member of the Minnesota Dental Association, the Minneapolis District Dental
Society, the American College of Dentists, the Academy of Operative Dentistry,
the Minnesota Academy of Restorative Dentistry and the Minnesota Academy for
Gnathological Research.
ALLEN M. GELWICK has served as a Senior Vice President of Alexander & Alexander,
an insurance brokerage firm, since 1995 and was previously a member of Alexander
& Alexander's Chairman's Council. From 1992 until 1994, he served as Senior Vice
President for Minet Insurance Services. Prior thereto, Mr. Gelwick served as
Senior Vice President for Frank B. Hall & Co. and was an underwriter for Chubb
Insurance.
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<PAGE>
MACK E. GREDER, D.D.S. has been engaged in the private practice of dentistry in
Omaha, Nebraska since 1970 and is President of Mack E. Greder, D.D.S., P.C., one
of the Founding Affiliated Practices.
ROGER ALLEN KAY, D.D.S. has been engaged in the private practice of dentistry in
Farmington and Livermore Falls, Maine since 1972 and is President of Roger Allen
Kay, D.D.S., P.A., one of the Founding Affiliated Practices. He is a member of
the Maine Dental Association, the American Dental Association, the Academy of
General Dentistry and the American Society of Dentistry for Children.
GERALD F. MAHONEY has been Chairman of the Board and Chief Executive Officer of
Mail-Well, Inc., a public company engaged in printing and envelope manufacturing
with over 50 printing offices throughout the United States, since 1994. Prior
thereto, he served as Chairman of the Board, President and Chief Executive
Officer of Pavey Envelope beginning in 1991. Mr. Mahoney is a certified public
accountant.
ANTHONY P. MARIS is a consultant to health care businesses. From 1987 to 1996,
Mr. Maris was a Director, Vice President, Chief Financial Officer and Treasurer
of Roberts Pharmaceutical Corporation, a public company engaged in
pharmaceuticals manufacturing. Prior thereto, Mr. Maris was a Director and Chief
Financial Officer of Hoffmann--La Roche Inc., a pharmaceutical manufacturer.
GEORGE M. SIEGEL was President and Chief Executive Officer of Parcelway Courier
Systems, Inc., a publicly traded messenger and courier business with operations
throughout North America, from 1990 to 1997. In 1993, Mr. Siegel co-founded U.S.
Delivery Systems, a public company engaged in consolidating local messenger and
delivery companies. Prior thereto, Mr. Siegel founded and was the President and
Chief Executive Officer of U.S. Messenger & Delivery Service and Direct Dispatch
Corporation, two messenger and courier service companies that he sold to Mayne
Nickless Courier System, Inc.
RONALD M. YAROS, D.D.S. has been engaged in the private practice of dentistry in
Aurora, Colorado since 1973 and is President of Ronald M. Yaros, D.D.S., P.C.,
one of the Founding Affiliated Practices. He is a member of the American Dental
Association, the Colorado Dental Association, the Metro Denver Dental Society
and the Academy of General Dentistry.
BOARD OF DIRECTORS
The Board of Directors will be divided into three classes with at least four
directors in each class, with the term of one class expiring at the annual
meeting of stockholders in each year, commencing in 1998. At each annual meeting
of stockholders, directors of the class the term of which then expires will be
elected by the holders of the Common Stock to succeed those directors whose
terms are expiring. The first class, whose term of office will expire at the
first annual meeting of stockholders in 1998, is comprised of Drs. Andress,
Geistfeld and Kay, and Mr. Casas; the second class, whose term will expire one
year thereafter, is comprised of Drs. Clarke, Greder and Yaros and Mr. Carr; and
the third class, whose term will expire two years thereafter, is comprised of
Dr. Reed and Messrs. Glatter, Mahoney, Maris and Siegel. The Company's Bylaws
provide that a majority of the members of the Board of Directors must be
licensed to practice dentistry and affiliated with one of the Affiliated
Practices. See "Risk Factors--Board Composition."
On closing of the Offering, there will be three committees of the Board:
Audit, Compensation and Executive. The initial members of the Audit Committee
will be Messrs. Maris and Mahoney. The initial members of the Compensation
Committee will be Messrs. Maris, Siegel and Casas. The initial members of the
Executive Committee will be Dr. Reed and Messrs. Glatter and Siegel. The members
of the Audit and Compensation Committees will not be employees of the Company.
Directors who are employees of the Company or a Founding Affiliated Practice
do not receive additional compensation for serving as directors. Each director
who is not an employee of the Company or a Founding Affiliated Practice will
receive a fee of $1,500 for attendance at each Board of Directors meeting and
$750 for each committee meeting (unless held on the same day as a Board of
Directors meeting), and an initial grant of nonqualified options to purchase
10,000 shares of Common Stock (except
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<PAGE>
with respect to Messrs. Casas and Siegel, who have waived their right to receive
those options). Directors who are not employees of the Company will also receive
annual grants of nonqualified options to purchase 5,000 shares on the first
business day of the month following the date on which each annual meeting of the
Company's stockholders is held. See "--1997 Stock Compensation Plan." All
directors of the Company are reimbursed for out-of-pocket expenses incurred in
attending meetings of the Board of Directors or committees thereof, and for
other expenses incurred in their capacity as directors of the Company.
EXECUTIVE COMPENSATION
Pentegra has conducted no operations to date other than in connection with
the Offering and the Affiliations. The Company anticipates that during 1997 its
most highly compensated executive officers will be Dr. Reed and Messrs. Glatter,
Carr, Dunn and Thayer (the "Named Executive Officers"), each of whom has entered
or will enter into an employment agreement providing for an annual salary of
$175,000, $175,000, $175,000, $125,000 and $125,000, respectively. See
"--Employment Agreements."
In addition to base salary, Messrs. Glatter, Carr, Dunn and Thayer through
their employment agreements are eligible for certain bonuses described under
"--Employment Agreements" and performance bonuses based on the achievement of
specific financial targets of the Company. Performance bonuses will not exceed
50% of base salary for each of those officers, except Mr. Glatter (whose bonus
will not exceed 200% of his base salary).
In September 1997, the Company granted options to purchase 333,333 shares,
66,667 shares, 33,333 shares and 33,333 shares of Common Stock to Messrs.
Glatter, Carr, Dunn and Thayer, respectively, under the Company's 1997 Stock
Compensation Plan, exercisable at the initial public offering price per share
set forth on the cover page of this Prospectus. Of the options granted to Mr.
Glatter, options to acquire 166,667 shares vest on the first anniversary of the
date of this Prospectus, options to acquire 66,667 shares vest on each of the
second and third anniversaries of the date of this Prospectus, and options to
acquire 33,333 shares vest on the fourth anniversary of the date of this
Prospectus. The options granted to Messrs. Carr, Dunn and Thayer vest annually
in 20% increments beginning on the first anniversary of the date of this
Prospectus. See "--1997 Stock Compensation Plan."
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Dr. Reed, Messrs.
Glatter, Carr, Dunn and Thayer and Ms. Rozman. These agreements, which will be
effective on the closing of the Affiliations and the Offering, have been filed
as exhibits to the Registration Statement of which this Prospectus is a part.
Each of these agreements provides for an annual base salary in an amount not
less than the initial specified amount and entitles the employee to participate
in all the Company's compensation plans in which other executive officers of the
Company participate. Dr. Reed's employment agreement provides that he will serve
as the Company's clinical officer and has a three-year term commencing on
completion of the Offering. Dr. Reed's base salary under the employment
agreement will be $175,000 per year, or as increased from time to time by the
Board of Directors, and provides for bonus payments aggregating $1,250,000
payable by the Company in installments of $10,000 on closing of each future
dental practice affiliation subsequent to the Offering until the bonus has been
paid in full, provided that the bonus must be paid in full by the third
anniversary of the date of this Prospectus. Mr. Glatter's employment agreement
provides that he will serve as the Company's chief executive officer and
president and has at least a four-year term commencing on July 1, 1997. Mr.
Glatter's base salary under the employment agreement will be as follows: (i)
$175,000 per year for the period from July 1, 1997 through June 30, 1998, (ii)
$200,000 per year for the period from July 1, 1998 through June 30, 1999, (iii)
$225,000 per year for the period from July 1, 1999 through June 30, 2000 and
(iv) $250,000 per year from July 1, 2000 thereafter or as increased from
time-to-time by the Board of Directors. Each of the agreements for Messrs. Carr,
Dunn and Thayer and Ms. Rozman has a continuous five-year term with an annual
base salary of $175,000 for Mr. Carr and of $125,000 for each of the other
officers, and is subject to the right of the Company to terminate the
39
<PAGE>
employee's employment at any time. Mr. Glatter is eligible to receive an annual
cash bonus in an amount equal to 50%, 100%, 150% or 200% of his base salary in
the event that the Company experiences from 5% to 9.99%, 10% to 19.99%, 20% to
29.99% or greater than 30%, respectively, growth in earnings per share on a
year-to-year basis (calculated on a pro forma basis for the calendar year prior
to the Company's first fiscal year of operations). For purposes of determining
the applicable year's earnings per share change, the cash bonuses payable to Mr.
Glatter and under all other employment agreements between the Company and its
officers will be taken into account. Each of the other named officers (except
Dr. Reed and Mr. Glatter) is eligible to receive an annual cash bonus in an
amount equal to 10%, 20%, 30%, 40% or 50% of his or her base salary in the event
that the Company experiences 20% to 22.5%, 22.5% to 25%, 25% to 27.5%, 27.5% to
30% or greater than 30%, respectively, growth in earnings per share on a
year-to-year basis (calculated on a pro forma basis for the calendar year prior
to the Company's first fiscal year of operations). For purposes of determining
the applicable year's earnings per share change, the cash bonuses payable to the
officer and under all other employment agreements between the Company and its
officers will be taken into account.
If the employee's employment is terminated by the Company without cause (as
defined), Messrs. Carr, Dunn and Thayer and Ms. Rozman will be entitled to a
payment equal to either 12 months' or six months' salary depending on whether
such employee has relocated to Phoenix, Arizona, and Dr. Reed and Mr. Glatter
will be entitled to a payment equal to the salary payable over the remaining
term of their respective employment agreements. Mr. Thayer will also receive a
$25,000 bonus on the closing of the Offering and a $25,000 bonus on the first
anniversary of that closing. Each of the foregoing agreements also contains a
covenant limiting competition with the Company for one year following
termination of employment.
Each Founding Affiliated Practice will enter into an employment agreement
with its dentist employees. See "Business--Dentist Employment Agreements."
1997 STOCK COMPENSATION PLAN
In August 1997, the Board of Directors adopted, and the stockholders of the
Company approved, the 1997 Stock Compensation Plan. The purpose of the 1997
Stock Compensation Plan is to provide the Company's employees, non-employee
directors and advisors and employees and directors of Affiliated Practices with
additional incentives by increasing their proprietary interest in the Company.
The aggregate number of shares of Common Stock with respect to which options and
awards may be granted under the 1997 Stock Compensation Plan may not exceed
2,000,000 shares.
The 1997 Stock Compensation Plan provides for the grant of incentive stock
options ("ISOs"), as defined in Section 422 of the Code, nonqualified stock
options (collectively with ISOs, "Options") and restricted stock awards
("Awards"). Following the consummation of the Offering, the 1997 Stock
Compensation Plan will be administered by the Compensation Committee of the
Board of Directors, which will be comprised of not less than two members of the
Board of Directors (the "Committee"). Prior to the consummation of the Offering,
the 1997 Stock Compensation Plan had been administered by the Company's full
Board of Directors. The Committee has, subject to the terms of the 1997 Stock
Compensation Plan, the sole authority to grant Options and Awards under the 1997
Stock Compensation Plan, to interpret the 1997 Stock Compensation Plan and to
make all other determinations necessary or advisable for the administration of
the 1997 Stock Compensation Plan.
All of the Company's employees, non-employee directors and advisors and
employees and directors of Affiliated Practices are eligible to receive
nonqualified stock options and Awards under the 1997 Stock Compensation Plan,
but only employees of the Company are eligible to receive ISOs. Options will be
exercisable during the period specified in each option agreement and will
generally be exercisable in installments pursuant to a vesting schedule to be
designated by the Committee. Notwithstanding the provisions of any option
agreement, options will become immediately exercisable in the event of certain
40
<PAGE>
events including certain merger or consolidation transactions and changes in
control of the Company. No Option will remain exercisable later than ten years
after the date of grant (or five years from the date of grant in the case of
ISOs granted to holders of more than 10% of the outstanding Common Stock). An
Award grants the recipient the right to receive a specified number of shares of
Common Stock, which shall become vested over a period of time, not exceeding 10
years, specified by the Committee. Restricted stock transferred to a recipient
shall be forfeited upon the termination of the recipient's employment or service
other than for death, permanent disability or retirement unless the Committee,
in its sole discretion, waives the restrictions for all or any part of an Award.
The exercise price for ISOs granted under the 1997 Stock Compensation Plan
may be no less than the fair market value of the Common Stock on the date of
grant (or 110% of the fair market value in the case of ISOs granted to employees
owning more than 10% of the Common Stock). The exercise price for nonqualified
options granted under the 1997 Stock Compensation Plan may not be less than the
fair market value of the Common Stock on the date of grant.
Payment upon exercise of an Option may be made in cash or by check, by means
of a "cashless exercise" involving the sale of shares by, or a loan from, a
broker, or, in the discretion of the Committee, by delivery of shares of Common
Stock, by payment of the par value of the shares subject to the Option plus a
promissory note for the balance of the exercise price or in any other form of
valid consideration permitted by the Committee.
There are generally no federal income tax consequences upon the grant of an
Option under the 1997 Stock Compensation Plan. Upon exercise of a nonqualified
option, the optionee generally will recognize ordinary income in the amount
equal to the difference between the fair market value of the shares at the time
of exercise and the exercise price, and the Company is generally entitled to a
corresponding deduction. When an optionee sells shares issued upon the exercise
of a nonqualified stock option, the optionee realizes short-term, mid-term or
long-term capital gain or loss, depending on the length of the holding period.
If the optionee holds the shares for more than 18 months, the capital gain or
loss will be long-term capital gain or loss. If the optionee holds the shares
for more than one year but not more than 18 months, the capital gain or loss
will be mid-term capital gain or loss. Otherwise, the capital gain or loss will
be short-term capital gain or loss. The Company is not entitled to any deduction
in connection with such sale.
An optionee will not be subject to federal income taxation upon the exercise
of ISOs granted under the 1997 Stock Compensation Plan, and the Company will not
be entitled to a federal income tax deduction by reason of such exercise. A sale
of shares of Common Stock acquired upon exercise of an ISO that does not occur
within one year after the date of exercise or within two years after the date of
grant of the option generally will result in the recognition of long-term or
mid-term capital gain or loss by the optionee in an amount equal to the
difference between the amount realized on the sale and the exercise price, and
the Company is not entitled to any deduction in connection therewith. If a sale
of shares of Common Stock acquired upon exercise of an ISO occurs within one
year from the date of exercise of the option or within two years from the date
of the option grant (a "disqualifying disposition"), the optionee generally will
recognize ordinary income equal to the lesser of (i) the excess of the fair
market value of the shares on the date of exercise of the options over the
exercise price or (ii) the excess of the amount realized on the sale of the
shares over the exercise price. Any amount realized on a disqualifying
disposition in excess of the amount treated as ordinary income will be long-term
or short-term capital gain, depending upon the length of time the shares were
held. The Company generally will be entitled to a tax deduction on a
disqualifying disposition corresponding to the ordinary income recognized by the
optionee.
For alternative minimum tax purposes, the difference between the fair market
value, on the date of exercise, of Common Stock purchased upon the exercise of
an ISO, and the exercise price increases alternative minimum taxable income.
Additional rules apply if an optionee makes a disqualifying disposition of the
Common Stock.
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<PAGE>
There are generally no federal income tax consequences upon the grant of an
Award, except as described below regarding a section 83(b) election. Upon the
expiration of the restrictions on shares of Common Stock subject to an Award,
except as provided in the next sentence, the recipient of the Award will
recognize taxable ordinary income equal to the fair market value of the shares
at the time of such expiration. If the recipient of an Award elects, pursuant to
section 83(b) of the Code, within 30 days of the date shares of restricted stock
are considered transferred to the recipient, to recognize taxable ordinary
income at the time of the transfer in an amount equal to the fair market value
of such shares, no additional income will be recognized upon the lapse of the
restrictions on the shares and no deduction will be allowed to the recipient if
the shares are subsequently forfeited. A recipient who makes such an election
under section 83(b) is required to give notice of such election to the Company
immediately after making the election, and the Company will be entitled to a
deduction equal to the amount of income recognized by the recipient. For capital
gain purposes, the recipient's holding period for the shares received will begin
at the time taxable income is recognized under these rules and his or her basis
in the shares will be the amount of ordinary income recognized.
The Company anticipates that upon the consummation of the Offering it will
have (i) outstanding options to purchase a total of 671,667 shares of Common
Stock under the 1997 Stock Compensation Plan and (ii) 1,328,333 additional
shares available for future awards under the 1997 Stock Compensation Plan.
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<PAGE>
CERTAIN TRANSACTIONS
ORGANIZATION OF THE COMPANY
In connection with the formation of the Company, in February 1997, PII
issued common stock to J. Michael Casas (200,000 shares), James L. Dunn, Jr.
(100,000 shares), John G. Thayer (66,667 shares) and Allen M. Gelwick (66,667
shares), at a purchase price per share of $0.01. In May 1997, PII issued Class B
Preferred to J. Michael Casas (66,667 shares) and James L. Dunn, Jr. (33,334
shares), at a purchase price per share of $0.01. In May 1997, PII issued Common
Stock to George M. Siegel (300,000 shares), Dr. Reed (150,000 shares), Gary S.
Glatter (100,000 shares), Kelly W. Reed (150,000 shares) and Kimberlee K. Rozman
(33,333 shares), at a purchase price per share of $0.01. In September 1997 and
October 1997, PII repurchased 46,667 shares and 20,000 shares, respectively, of
its common stock from George M. Siegel at a purchase price per share of $0.01.
In September 1997, the Company issued 66,667 shares of common stock to Sam H.
Carr at a purchase price of $0.01 per share.
In connection with the raising of $1,450,000 by PII in order to fund a
portion of the expenses for the Offering and the Affiliations, in June 1997, PII
issued capital stock to Dr. Reed (37,500 shares of Class B Preferred and 7,500
shares of common stock), Gary S. Glatter (37,500 shares of Class B Preferred and
7,500 shares of common stock), George M. Siegel (37,500 of Class B Preferred and
7,500 shares of common stock), Mack E. Greder, D.D.S. (25,000 shares of Class B
Preferred and 5,000 shares of common stock), Roger Allen Kay, D.D.S. (25,000
shares of Class B Preferred and 5,000 shares of common stock), Bruce A. Kanehl,
D.D.S. (25,000 shares of Class B Preferred and 5,000 shares of common stock),
Brian K. Kniff, D.D.S. (25,000 shares of Class B Preferred and 5,000 shares of
common stock), Richard W. Mains, Jr., D.M.D., RBM Trust (25,000 shares of Class
B Preferred and 5,000 shares of common stock), James W. Medlock, D.D.S. (25,000
shares of Class B Preferred and 5,000 shares of common stock), Thomas L.
Mullooly, D.D.S. (25,000 shares of Class B Preferred and 5,000 shares of common
stock), Richard H. Fettig, D.D.S. (25,000 shares of Class B Preferred and 5,000
shares of common stock), Marvin V. Cavallino, D.D.S. (50,000 shares of Class B
Preferred and 10,000 shares of common stock), Alan H. Gerbholz, D.D.S. (25,000
shares of Class B Preferred and 5,000 shares of common stock), Victor H.
Burdick, D.D.S. (25,000 shares of Class B Preferred and 5,000 shares of common
stock), Steve Anderson, D.D.S. (25,000 shares of Class B Preferred and 5,000
shares of common stock) and James P. Allen, D.D.S. (25,000 shares of Class B
Preferred and 5,000 shares of common stock), at a purchase price per share of
$1.00 for the Class B Preferred and of $0.01 for the common stock.
In September 1997, (i) each owner of shares of common stock of PII agreed to
exchange those shares for shares of Common Stock on a one-for-one basis and (ii)
each of Dr. Reed and Messrs. Glatter, Dunn, Casas and Siegel agreed to sell to
PII all shares of Class B Preferred he owns at a price per share equal to the
subscription price he paid to PII for those shares, which transactions will
occur concurrently with the closing of the Offering and the Affiliations. In
addition, immediately after the completion of the repurchases described in the
foregoing sentence, all outstanding shares of Class A Preferred and Class B
Preferred will be redeemed by PII at a redemption price of $2.00 per share from
the proceeds of the Offering.
In December 1997, the owners of the outstanding shares of common stock of
PII agreed that, in the event the initial public offering price is less than
$12.00 per share, PII will repurchase from those stockholders, on a pro rata
basis, at a purchase price of $.01 per share, that number of shares as will be
necessary so that the aggregate number of shares of Common Stock issuable in
connection with the Affiliations and the Share Exchange will not exceed
3,941,898 shares. Pursuant to that agreement, assuming an initial public
offering price of $10.00 per share, PII would repurchase approximately 24.9% of
each such stockholder's shares of PII common stock, or an aggregate of 437,038
shares.
The Company has entered into an agreement with Pentegra, Ltd., Napili and
Dr. Reed to purchase substantially all of the tangible and intangible assets of
Pentegra, Ltd. and Napili for $200,000 upon completion of the Offering. Dr. Reed
beneficially owns approximately 51.0% of the capital stock of each of Pentegra,
Ltd. and Napili and the Reed Family Trust (which is administered by, and whose
beneficiaries
43
<PAGE>
are, the children of Dr. Reed) beneficially owns 49% of the capital stock of
each of Pentegra, Ltd. and Napili. The assets that the Company will acquire from
Pentegra, Ltd. and Napili include office furniture and equipment, marketing
systems, recall systems, telephone systems, customer/client lists, books and
records and video tapes.
Since February 1997, the Company has occupied and had access to the
facilities, equipment and staff of James L. Dunn & Assoc., Inc., an affiliate of
James L. Dunn, Jr. Beginning June 1, 1997, the Company agreed to compensate
James L. Dunn & Assoc., Inc. for use of and access to its office facilities,
equipment and staff at the rate of $10,000 per month. James L. Dunn & Assoc.,
Inc. will also provide the Company a monthly invoice for delivery, postage,
telephone, travel and other out-of-pocket expenses and obtain reimbursement for
those expenses from the Company. Through October 31, 1997, the Company has
reimbursed James L. Dunn & Assoc., Inc. for approximately $9,000 of such
expenses. The Company believes that the compensation paid to James L. Dunn &
Assoc., Inc. represents the fair market value of the services (which includes
the shared use of two clerical employees, use of office furniture, copy
machines, computers and other office equipment, and office supplies) provided to
the Company. Subsequent to the Offering, this arrangement may continue on a
month-to-month basis at the discretion of the Company.
The Company has leased a portion of the office facilities, equipment and
staff of Pentegra, Ltd., which is wholly owned by Dr. Reed, beginning June 1,
1997. The Company has agreed to compensate Pentegra, Ltd. for use of and access
to its office facilities, equipment and staff at the rate of $11,000 per month.
Pentegra, Ltd. will also provide the Company a monthly invoice for delivery,
postage, telephone, travel and other out-of-pocket expenses and obtain
reimbursement for those expenses from the Company. Through October 31, 1997, the
Company has reimbursed Pentegra, Ltd. and Napili for approximately $6,000 of
such expenses. The Company believes that the compensation to be paid to
Pentegra, Ltd. represents the fair market value of the goods and services (which
includes utilities, furniture, office equipment and clerical services) being
provided to the Company under this arrangement. This lease will be assumed by
the Company in the Pentegra/Napili Transaction.
The following table provides certain information concerning each of the
Affiliations and each person who has an ownership interest in a Founding
Affiliated Practice (all of whom are promoters of the Company):
<TABLE>
<CAPTION>
CONSIDERATION TO BE RECEIVED
DEBT AND ---------------------------------------
ASSETS TO BE LIABILITIES NUMBER OF VALUE OF
FOUNDING AFFILIATED PRACTICE(1) CONTRIBUTED(2) ASSUMED SHARES(3) SHARES(3) CASH
- ----------------------------------------- -------------- ------------ ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
James P. Allen, D.D.S.................... $ 54,224 $ 67,069 55,320 $ 553,200 $ 138,301
Anderson Dental Group, Inc.:
Walter J. Anderson, D.D.S.............. 12,818 56,581 32,950 329,500 82,376
Donald H. Plotkin, D.D.S............... 12,012 53,026 30,880 308,800 77,200
William A. Cerney, D.D.S............... 10,132 44,730 26,049 260,490 65,122
Brian M. Ellis, D.D.S.................. 10,132 44,730 26,049 260,490 65,122
Afshan Kaviani, D.D.S.................. 9,282 40,976 23,863 238,630 59,658
William H. Swilley, D.D.S.............. 2,571 11,348 6,609 66,090 16,522
Ronnie L. Andress, D.D.S., Inc........... 119,366 181,623 86,531 865,310 216,326
Victor H. Burdick, D.D.S., P.C........... -- 4,344 45,650 456,500 114,126
Marvin V. Cavallino, D.D.S., A
Professional Corporation............... 40,340 72,426 57,379 573,790 143,447
James H. Clarke, Jr., D.D.S., Inc........ 134,400 131,952 52,011 520,110 130,027
Henry F. Cuttler, D.D.S.................. 91,705 114,028 31,684 316,840 79,211
Edward T. Dougherty, Jr., D.D.S., P.A.... 13,284 -- 93,132 931,320 232,830
Family Dental Center, P.A.:
Steve Anderson, D.D.S.................. 48,830 -- 70,685 706,850 176,711
Lindi B. Anderson, D.D.S............... 12,208 -- 17,671 176,710 44,178
</TABLE>
(TABLE CONTINUED)
44
<PAGE>
<TABLE>
<CAPTION>
CONSIDERATION TO BE RECEIVED
DEBT AND ---------------------------------------
ASSETS TO BE LIABILITIES NUMBER OF VALUE OF
FOUNDING AFFILIATED PRACTICE(1) CONTRIBUTED(2) ASSUMED SHARES(3) SHARES(3) CASH
- ----------------------------------------- -------------- ------------ ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Richard H. Fettig, D.D.S................. 14,288 19,836 38,921 389,210 97,303
Alan H. Gerbholz, D.D.S., P.C............ 15,154 -- 36,581 365,810 91,451
Michael J. Gershtenson, D.D.S., P.C...... 92,794 24,948 39,227 392,270 98,067
Mack E. Greder, D.D.S., P.C.............. 43,211 37,505 57,273 572,730 143,183
Salvatore Guarnieri, D.D.S............... 76,652 28,205 40,118 401,180 100,295
Kent Hamilton, D.D.S..................... 160,781 200,000 95,305 953,050 238,262
David R. Henderson, D.D.S................ 6,202 -- 34,044 340,440 85,109
Stephen Hwang, D.D.S..................... 14,198 -- 29,973 299,730 74,931
Jackson Dental Partnership:
Penn Jackson, Sr., D.D.S............... 47,842 -- 26,056 260,560 --
Penn Jackson, Jr., D.D.S............... 31,894 -- 17,371 173,710 --
Bruce A. Kanehl, D.D.S................... -- 22,532 58,951 589,510 147,378
Roger Allen Kay, D.D.S., P.A............. 19,883 4,816 57,607 576,070 144,017
Patrick T. Kelly, D.D.S., P.C............ 20,133 12,000 15,603 156,030 39,008
Brian K. Kniff, D.D.S., P.C.:
Brian K. Kniff, D.D.S.................. 102,477 23,327 45,539 455,390 113,848
Gordon Ledingham, D.D.S................ 102,477 23,327 45,539 455,390 113,848
Lakeview Dental, P.C. (Kevin Gasser,
D.D.S.)................................ 19,586 34,803 40,872 408,720 102,180
Donald W. Lanning, D.D.S................. 39,167 -- 24,867 248,670 40,000
David A. Little, D.D.S................... 89,519 230,859 42,336 423,360 105,840
Susan Lunson, D.D.S...................... 73,457 190,675 23,701 237,010 59,253
Richard W. Mains, Jr., D.M.D., P.C....... 86,785 -- 67,261 672,610 168,152
James M. McDonough, D.D.S................ 43,476 56,000 50,570 505,700 126,424
James W. Medlock, D.D.S., P.A............ 18,282 33,066 71,976 719,760 179,940
James Randy Mellard, D.D.S. M.S., P.C.... 48,327 65,242 12,794 127,940 31,986
Mary B. Mellard, D.D.S., P.C............. 128,119 230,733 51,425 514,250 128,562
TL Mullooly, D.D.S., Inc................. 48,812 -- 38,767 387,670 96,918
Byron L. Novosad, D.D.S., Inc............ 6,594 -- 39,969 399,690 99,923
Randy O'Brien, D.D.S., Inc............... 21,527 27,753 30,725 307,250 76,811
Terrence C. O'Keefe, D.D.S............... 45,442 52,139 24,300 243,000 81,000
Harold A. Pebbles, Jr., D.D.S., P.C...... -- -- 47,857 478,570 119,641
Jimmy F. Pinner, D.D.S................... 18,664 12,000 14,647 146,470 36,619
Omer K. Reed, D.D.S...................... 17,806 0 31,298 312,980 --
Richard Reinitz, D.D.S., P.C............. 96,284 226,009 126,395 1,263,950 315,988
Greg Richards, D.D.S..................... 49,194 59,000 16,524 165,240 41,302
Richard N. Smith, D.M.D., P.C............ 34,399 94,998 81,252 812,520 203,129
John N. Stellpflug, D.D.S................ 20,079 36,750 40,002 400,020 100,006
Jack Stephens, D.D.S..................... 54,409 -- 102,609 1,026,090 256,523
Y. Paul Suzuki, D.D.S., P.C.............. 18,900 1,864 38,348 383,480 95,870
Donald F. Tamborello, D.D.S.............. 13,808 7,565 45,864 458,640 114,660
Helena Thomas, D.D.S..................... 93,011 113,013 24,626 246,260 61,566
Louis J. Thornley, D.D.S., P.C........... 25,843 -- 35,595 355,950 88,989
S. Victor Uhrenholdt, D.D.S., P.C........ 42,716 50,157 50,687 506,870 126,718
Scott Van Zandt, D.D.S................... 7,741 1,675 34,099 340,990 85,248
Ronald M. Yaros, D.D.S., P.C............. 216,938 5,404 118,332 1,183,320 295,830
-------------- ------------ ---------- ------------- ------------
$ 2,698,175 $ 2,749,034 2,622,269 $ 26,222,690 $ 6,366,935
-------------- ------------ ---------- ------------- ------------
-------------- ------------ ---------- ------------- ------------
</TABLE>
- ---------
(1) Unless otherwise noted, the dentist who owns all of the capital stock of the
Founding Affiliated Practice is set forth in the name of that Founding
Affiliated Practice.
45
<PAGE>
(2) Assets to be contributed reflects the historical book value of the
nonmonetary assets of each practice to be transferred to the Company. These
nonmonetary assets are reflected at historical cost in accordance with SAB
No. 48. All monetary assets are recorded at fair value, which is
approximated by the historical costs recorded by the practices.
(3) Assumes an initial public offering price of $10.00 per share. The actual
number of shares to be issued as consideration for the Affiliations may be
higher or lower depending on the actual initial public offering price per
share. For example, an aggregate of 2,383,881 shares of Common Stock would
be issued to the dentist-owners of the Founding Affiliated Practices if that
price is $11.00 per share, while an aggregate of 2,913,631 shares of Common
Stock would be issued to the dentist-owners of the Founding Affiliated
Practices if that price is $9.00 per share.
The consideration being paid by the Company for each Founding Affiliated
Practice was determined by negotiations between executive officers of the
Company not affiliated with any Founding Affiliated Practice and a
representative of that Founding Affiliated Practice. The Company used the same
valuation method to negotiate the consideration being paid to each of the
Founding Affiliated Practices, including the respective practices wholly owned
by Drs. Reed, Andress, Clarke, Greder, Kay and Yaros, which method was based
upon the Founding Affiliated Practice's gross revenue net of certain operating
expenses, and the Company's assessment of growth potential.
All of the 2,622,269 shares of Common Stock issued in the Affiliations to
the dentists named in the foregoing table and all of 1,319,629 shares of Common
Stock in the Share Exchange will have certain piggy-back registration rights.
See "Shares Eligible for Future Sale."
COMPANY POLICY
It is anticipated that future transactions with affiliates of the Company
will be minimal, will be approved by a majority of the disinterested members of
the Board of Directors and will be made on terms no less favorable to the
Company than could be obtained from unaffiliated third parties. The Company does
not intend to incur any further indebtedness to, or make any loans to, any of
its executive officers, directors or other affiliates.
46
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table shows, as of December 1, 1997 and immediately after
giving effect to the closing of the Affiliations and the Offering, the then
"beneficial ownership" of the Common Stock of (i) each director and person
nominated to become a director on closing of the Offering, (ii) each executive
officer, (iii) all executive officers and directors of the Company as a group
and (iv) each person who owns more than 5% of the outstanding Common Stock. The
table assumes none of such persons intend to acquire shares in the Offering. The
address of each person in the table is c/o Pentegra Dental Group, Inc., 2999
North 44th Street, Suite 650, Phoenix, Arizona 85018.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
BEFORE OFFERING AFTER OFFERING(1)
----------------------- -----------------------
NUMBER PERCENT NUMBER PERCENT
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Omer K. Reed, D.D.S.................................................. 157,500 9.0% 149,614 2.3%
Gary S. Glatter...................................................... 107,500 6.1% 80,755 1.3%
Sam H. Carr.......................................................... 66,667 3.8% 50,081 *
James L. Dunn, Jr.................................................... 93,333 5.3% 70,113 1.1%
John G. Thayer....................................................... 66,667 3.8% 50,081 *
Kimberlee K. Rozman.................................................. 33,333 1.9% 25,040 *
Ronnie L. Andress, D.D.S............................................. 0 -- 86,531 1.3%
George M. Siegel..................................................... 240,833 13.7% 180,916 2.8%
J. Michael Casas..................................................... 200,000 11.4% 150,242 2.3%
Ronald M. Yaros, D.D.S............................................... 0 -- 118,332 1.8%
Kelly W. Reed(2)..................................................... 150,000 8.5% 112,681 1.7%
Roger Allen Kay, D.D.S............................................... 5,000 * 61,363 *
Mack E. Greder, D.D.S................................................ 5,000 * 61,029 *
James H. Clarke, Jr., D.D.S.......................................... 0 -- 52,011 *
Allen M. Gelwick..................................................... 66,667 3.8% 50,081 *
Ronald E. Geistfeld, D.D.S........................................... 0 -- 0 --
Gerald F. Mahoney.................................................... 0 -- 0 --
Anthony P. Maris..................................................... 0 -- 0 --
All executive officers and directors as a group (17 persons)......... 1,042,500 59.3% 1,178,677 18.3%
</TABLE>
- ---------
* less than 1%.
(1) Shares shown in the above table do not include shares that could be acquired
upon exercise of currently outstanding stock options which do not vest
within 60 days of the date of this Prospectus. The number of shares of
Common Stock to be issued in connection with the Affiliations (2,622,269
shares) and the Share Exchange (1,319,629 shares) assumes an initial public
offering price of $10.00 per share. The actual number of such shares may be
higher or lower depending on the actual initial public offering price per
share.
(2) Kelly W. Reed, Vice President of Operations of the Company, is the son of
Omer K. Reed, D.D.S.
47
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 40,000,000 shares of
Common Stock, par value $.001 per share, and 10,000,000 shares of preferred
stock, par value $.001 per share ("Preferred Stock"). At September 30, 1997,
1,756,667 shares of Common Stock were issued and outstanding and held of record
by 52 stockholders. The following summary is qualified in its entirety by
reference to the Certificate of Incorporation, which is included as an exhibit
to the Registration Statement of which this Prospectus is a part.
COMMON STOCK
The Common Stock possesses ordinary voting rights for the election of
directors and in respect of other corporate matters, and each share has one
vote. The Common Stock affords no cumulative voting rights, and the holders of a
majority of the shares voting for the election of directors can elect all the
directors if they choose to do so. The Common Stock carries no preemptive
rights, is not convertible, redeemable or assessable. The holders of Common
Stock are entitled to dividends in such amounts and at such times as may be
declared by the Board of Directors out of funds legally available therefor. See
"Dividend Policy" for information regarding the Company's dividend policy.
PREFERRED STOCK
The Preferred Stock may be issued from time to time by the Board of
Directors as shares of one or more series. Subject to the provisions of the
Certificate of Incorporation and limitations prescribed by law, the Board of
Directors is expressly authorized to adopt resolutions to issue the shares, to
fix the number of shares and to change the number of shares constituting any
series and to provide for or change the voting powers, designations, preferences
and relative, participating, optional, exchange or other special rights,
qualifications, limitations or restrictions thereof, including dividend rights
(including whether dividends are cumulative), dividend rates, terms of
redemption (including sinking fund provisions), redemption prices, conversion
rights and liquidation preferences of the shares constituting any class or
series of the Preferred Stock, in each case without any further action or vote
by the holders of Common Stock.
Although the Company has no present intention to issue shares of Preferred
Stock, the issuance of shares of Preferred Stock, or the issuance of rights to
purchase such shares, could be used to discourage an unsolicited acquisition
proposal. For example, the issuance of a series of Preferred Stock might impede
a business combination by including class voting rights that would enable the
holders to block such a transaction; or such issuance might facilitate a
business combination by including voting rights that would provide a required
percentage vote of the stockholders. In addition, under certain circumstances,
the issuance of Preferred Stock could adversely affect the voting power of the
holders of the Common Stock. Although the Board of Directors is required to make
any determination to issue such stock based on its judgment as to the best
interests of the stockholders of the Company, the Board of Directors could act
in a manner that would discourage an acquisition attempt or other transaction
that some or a majority of the stockholders might believe to be in their best
interests or in which stockholders might receive a premium for their stock over
the then-market price of such stock. The Board of Directors does not at present
intend to seek stockholder approval prior to any issuance of currently
authorized stock, unless otherwise required by law or the rules of any market on
which the Company's securities are traded.
STATUTORY BUSINESS COMBINATION PROVISION
The Company is a Delaware corporation and is subject to Section 203 of the
DGCL. In general, Section 203 prevents an "interested stockholder" (defined
generally as a person owning 15% or more of a corporation's outstanding voting
stock) from engaging in a "business combination" (as defined) with a Delaware
corporation for three years following the date such person became an interested
stockholder unless (i) before such person became an interested stockholder, the
board of directors of the corporation
48
<PAGE>
approved the transaction in which the interested stockholder became an
interested stockholder or approved the business combination, (ii) upon
consummation of the transaction that resulted in the interested stockholder's
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding stock held by directors who are also officers
of the corporation and by employee stock plans that do not provide employees
with the rights to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer) or (iii) following the
transaction in which such person became an interested stockholder, the business
combination was approved by the board of directors of the corporation and
authorized at a meeting of stockholders by the affirmative vote of the holders
of 66 2/3% of the outstanding voting stock of the corporation not owned by the
interested stockholder. Under Section 203, the restrictions described above also
do not apply to certain business combinations proposed by an interested
stockholder following the announcement or notification of one of certain
extraordinary transactions involving the corporation and a person who had not
been an interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors, if such extraordinary transaction is approved or not opposed by a
majority of the directors who were directors prior to any person becoming an
interested stockholder during the previous three years or were recommended for
election or elected to succeed such directors by a majority of such directors.
OTHER MATTERS
Delaware law authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of a director's fiduciary duty of care. The duty of care
requires that, when acting on behalf of the corporation, directors must exercise
an informed business judgment based on all material information reasonably
available to them. Absent the limitations authorized by Delaware law, directors
are accountable to corporations and their stockholders for monetary damages for
conduct constituting gross negligence in the exercise of their duty of care.
Delaware law enables corporations to limit available relief to equitable
remedies such as injunction or rescission. The Certificate of Incorporation
limits the liability of directors of the Company to the Company or its
stockholders to the fullest extent permitted by Delaware law. Specifically,
directors of the Company will not be personally liable for monetary damages for
breach of a director's fiduciary duty as a director, except for liability for
unlawful payments of dividends or unlawful stock repurchases or redemptions as
provided in Section 174 of the DGCL.
The inclusion of this provision in the Certificate of Incorporation may have
the effect of reducing the likelihood of derivative litigation against directors
and may discourage or deter stockholders or management from bringing a lawsuit
against directors for breach of their duty of care, even though such an action,
if successful, might otherwise have benefitted the Company and its stockholders.
The Company's Bylaws provide indemnification to the Company's officers and
directors and certain other persons with respect to certain matters.
The Bylaws provide that, from and after the first date that the Company has
received funding from the sale of capital stock in an initial public offering,
the stockholders may act only at an annual or special meeting of stockholders
and may not act by written consent. The Bylaws provide that special meetings of
the stockholders can be called only by the Chairman of the Board, the Chief
Executive Officer, the President or the Board of Directors.
The Certificate of Incorporation provides that the Board of Directors shall
consist of three classes of directors serving for staggered terms. As a result,
it is currently contemplated that approximately one-third of the Company's Board
of Directors will be elected each year. The classified board provision could
prevent a party who acquires control of a majority of the outstanding voting
stock of the Company from obtaining control of the Board of Directors until the
second annual stockholders' meeting following the date the acquirer obtains the
controlling interest. In addition, the Company's Bylaws provide that a
49
<PAGE>
majority of the members of the Board of Directors must be licensed dentists
affiliated with one of the Affiliated Practices. See "Management--Directors and
Executive Officers."
The Certificate of Incorporation provides that the number of directors shall
be as specified in the Bylaws. The Bylaws provide that the number of directors
shall be determined by the Board of Directors from time to time, but shall be at
least one and not more than nineteen. It also provides that directors may be
removed only for cause, and then only by the affirmative vote of the holders of
at least a majority of all outstanding voting stock entitled to vote. This
provision, in conjunction with the provision of the Bylaws authorizing the Board
of Directors to fill vacant directorships, will prevent stockholders from
removing incumbent directors without cause and filling the resulting vacancies
with their own nominees.
STOCKHOLDER PROPOSALS
The Company's Bylaws contain provisions (i) requiring that advance notice be
delivered to the Company of any business to be brought by a stockholder before
an annual meeting of stockholders and (ii) establishing certain procedures to be
followed by stockholders in nominating persons for election to the Board of
Directors. Generally, such advance notice provisions provide that written notice
must be given to the Secretary of the Company by a stockholder (i) in the event
of business to be brought by a stockholder before an annual meeting, not less
than 90 days nor more than 180 days prior to the earlier of the date of the
meeting or the corresponding date on which the immediately preceding annual
meeting of stockholders was held, and (ii) in the event of nominations of
persons for election to the Board of Directors by any stockholder, (a) with
respect to an election to be held at the annual meeting of stockholders, not
less than 90 days nor more than 180 days prior to the earlier of the date of the
meeting or the corresponding date on which the immediately preceding annual
meeting of stockholders was held, and (b) with respect to an election to be held
at a special meeting of stockholders for the election of directors, not later
than the close of business on the 10th day following the day on which notice of
the date of the special meeting was mailed to stockholders or public disclosure
of the date of the special meeting was made, whichever first occurs. Such notice
must set forth specific information regarding such stockholder and such business
or director nominee, as described in the Company's Bylaws. The foregoing summary
is qualified in its entirety by reference to the Company's Bylaws, which are
included as an exhibit to the Registration Statement of which this Prospectus is
a part.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Continental Stock
Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Affiliations and the Offering, the Company will
have outstanding 6,441,898 shares of Common Stock (6,816,898 if the
Underwriters' over-allotment option is exercised in full) of which the 2,500,000
shares sold in the Offering (2,875,000 if the Underwriters' over-allotment
option is exercised in full) will be freely tradable without restriction or
further registration under the Securities Act, except for those held by
"affiliates" (as defined in the Securities Act) of the Company, which shares
will be subject to the resale limitations of Rule 144 under the Securities Act.
The remaining 3,941,898 shares of Common Stock are deemed "restricted
securities" under Rule 144 in that they were originally issued and sold by the
Company in private transactions in reliance upon exemptions under the Securities
Act, and may be publicly sold only if registered under the Securities Act or
sold in accordance with an applicable exemption from registration, such as those
provided by Rule 144 promulgated under the Securities Act as described below.
In general, under Rule 144 as currently in effect, if a minimum of one year
has elapsed since the date of acquisition of restricted securities from the
issuer or from an affiliate of the issuer, the acquirer or
50
<PAGE>
subsequent holder would be entitled to sell within any three-month period a
number of those shares that does not exceed the greater of one percent of the
number of shares of such class of stock then outstanding or the average weekly
trading volume of the shares of such class of stock during the four calendar
weeks preceding the filing of a Form 144 with respect to such sale. Sales under
Rule 144 are also subject to certain manner of sale provisions and notice
requirements and to the availability of current public information about the
issuer. In addition, if a period of at least two years has elapsed since the
later of the date of acquisition of restricted securities from the issuer or
from any affiliate of the issuer, and the acquirer or subsequent holder thereof
is deemed not to have been an affiliate of the issuer of such restricted
securities at any time during the 90 days preceding a sale, such person would be
entitled to sell such restricted securities under Rule 144(k) without regard to
the requirements described above. Rule 144 does not require the same person to
have held the securities for the applicable periods. The foregoing summary of
Rule 144 is not intended to be a complete description thereof. The Commission
has proposed certain amendments to Rule 144 that would, among other things,
eliminate the manner of sale requirements and revise the notice provisions of
that rule. The Commission has also solicited comments on other possible changes
to Rule 144, including possible revisions to the one- and two-year holding
periods and the volume limitations referred to above.
As of September 30, 1997, options to purchase an aggregate of 671,667 shares
of Common Stock were authorized for issuance under the Company's 1997 Stock
Compensation Plan. See "Management--1997 Stock Compensation Plan." In general,
pursuant to Rule 701 under the Securities Act, any employee, officer or director
of, or consultant to, the Company who purchased his or her shares pursuant to a
written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701, which permit non-affiliates to sell such shares without
compliance with the public information, holding period, volume limitation or
notice provisions of Rule 144, and permit affiliates to sell such shares without
compliance with the holding period provisions of Rule 144, in each case
commencing 90 days after the date of this Prospectus. In addition, the Company
intends to file a registration statement covering the 1,500,000 shares of Common
Stock issuable upon exercise of stock options that may be granted in the future
under the 1997 Stock Compensation Plan, in which case such shares of Common
Stock generally will be freely tradable by non-affiliates in the public market
without restriction under the Securities Act.
The Company and its executive officers, directors and current stockholders
have agreed not to offer for sale, sell, contract to sell, grant any option or
other right for the sale of, or otherwise dispose of (or enter into any
transaction or device which is designed to, or could be expected to, result in
the disposition by any person at any time in the future of) any shares of Common
Stock or any securities, indebtedness or other rights exercisable for or
convertible or exchangeable into shares of Common Stock owned or acquired in the
future in any manner prior to the expiration of 180 days after the date of this
Prospectus (the "180-Day Lockup Period") without the prior written consent of
Lehman Brothers Inc., except that the Company may, subject to certain
conditions, issue shares of Common Stock in connection with future acquisitions
and may grant Options or Awards (or issue shares of Common Stock upon exercise
of Options or Awards) under the 1997 Stock Compensation Plan. These restrictions
will be applicable to any shares acquired by any of those persons in the
Offering or otherwise during the 180-Day Lockup Period. In addition, the
Company's executive officers, directors and current stockholders and the persons
acquiring shares of Common Stock in connection with the Affiliations have agreed
with the Company that they generally will not sell, transfer or otherwise
dispose of any of their shares for one year following the closing of the
Offering.
In connection with the Affiliations, the Company will enter into
registration rights agreements with former stockholders of the Founding
Affiliated Practices (the "Registration Rights Agreements"), which will provide
certain registration rights with respect to the Common Stock issued to such
stockholders in the Affiliations. Each Registration Rights Agreement will
provide the holders of Common Stock subject to such agreement with the right to
participate in registrations by the Company of its equity securities in
underwritten offerings. The registration rights conferred by the Registration
Rights Agreements will
51
<PAGE>
terminate on the second anniversary of the closing of the Offering. The Company
is generally required to pay the costs associated with such an offering, other
than underwriting discounts and commissions and transfer taxes attributable to
the shares sold on behalf of the selling stockholders. The Registration Rights
Agreements provide that the number of shares of Common Stock to be registered on
behalf of the selling stockholders is subject to limitation if the managing
underwriter determines that market conditions require a limitation. Under the
Registration Rights Agreements, the Company will indemnify the selling
stockholders thereunder, and such stockholders will indemnify the Company
against, certain liabilities in respect of any registration statement or
offering covered by the Registration Rights Agreements. The Company and each of
its current stockholders are parties to a stockholders agreement, which provides
those stockholders registration rights substantially equivalent to the
registration rights in the Registration Rights Agreements.
Prior to the Offering, there has been no established public market for the
Common Stock. No prediction can be made of the effect, if any, that sales of
shares under Rule 144, or otherwise, or the availability of shares for sale will
have on the market price of the Common Stock prevailing from time to time after
the Offering. The Company is unable to estimate the number of shares that may be
sold in the public market under Rule 144, or otherwise, because such amount will
depend on the trading volume in, and market price for, the Common Stock and
other factors. Nevertheless, sales of substantial amounts of shares in the
public market, or the perception that such sales could occur, could adversely
affect the market price of the Common Stock. See "Underwriting."
Following the consummation of the Offering, the Company intends to register
1,500,000 shares of Common Stock under the Securities Act for use in connection
with future acquisitions. These shares generally will be freely tradable after
their issuance by persons not affiliated with the Company unless the Company
contractually restricts their resale. Resales of any of those shares during the
180-Day Lockup Period would require the prior written consent of Lehman Brothers
Inc.
52
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date of this Prospectus (the "Underwriting Agreement"), the
underwriters named below (the "Underwriters"), for whom Lehman Brothers Inc. and
Rauscher Pierce Refsnes, Inc. are acting as representatives (the
"Representatives"), have severally agreed to purchase, and the Company has
agreed to sell, the respective number of shares of Common Stock set forth
opposite the name of each such Underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- --------------------------------------------------------------------------------- -----------
<S> <C>
Lehman Brothers Inc..............................................................
Rauscher Pierce Refsnes, Inc.....................................................
-----------
Total........................................................................ 2,500,000
-----------
-----------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
to purchase the shares of Common Stock are subject to certain conditions and
that, if any of the foregoing shares of Common Stock are purchased by the
Underwriters pursuant to the Underwriting Agreement, then all the shares of
Common Stock agreed to be purchased by the Underwriters pursuant to the
Underwriting Agreement must be so purchased.
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock in part directly to the public at
the public offering price set forth on the cover page of this Prospectus, and in
part to certain dealers (who may include the Underwriters) at such public
offering price, less a selling concession not in excess of $ per share. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share to certain brokers or dealers. After the initial offering to
the public, the public offering price, the concession to selected dealers and
the reallowance may be changed by the Underwriters.
The Company has granted the Underwriters an option to purchase up to 375,000
additional shares of Common Stock at the initial public offering price less the
underwriting discounts and commissions shown on the cover page of this
Prospectus, solely to cover over-allotments, if any. Such option may be
exercised at any time until 30 days after the date of the Underwriting
Agreement. To the extent that the option is exercised, each Underwriter will be
committed, subject to certain conditions, to purchase a number of additional
shares of Common Stock proportionate to such Underwriter's initial commitment as
indicated in the preceding table.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute,
under certain circumstances, to payments that the Underwriters may be required
to make in respect thereof.
The Company and its executive officers, directors and current stockholders
have agreed not to, directly or indirectly, offer for sale, sell, contract to
sell, grant any option or other right for the sale of, or otherwise dispose of
(or enter into any transaction or device which is designed to, or could be
expected to, result in the disposition by any person at any time in the future
of) any shares of Common Stock or any securities, indebtedness or other rights
exercisable for or convertible or exchangeable into shares of Common Stock prior
to the expiration of 180 days after the date of this Prospectus, without the
prior written consent of Lehman Brothers Inc., except that the Company may,
subject to certain conditions, issue shares of Common Stock in connection with
future acquisitions and grant Options or Awards (or issue shares of Common Stock
upon exercise of Options or Awards) under the 1997 Stock Compensation
53
<PAGE>
Plan. For information respecting additional restrictions on sales by the
Company's executive officers, directors, current stockholders and the persons
acquiring shares of Common Stock in connection with the Affiliations, see
"Shares Eligible for Future Sale."
Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price will be negotiated between the Company and the
Representatives. Among the factors to be considered in determining the initial
public offering price, in addition to prevailing market conditions, will be the
history of and the prospects for the industry in which the Company competes, the
past and present operations of the Founding Affiliated Practices, the historical
results of operations of the Founding Affiliated Practices, the Company's
capital structure, estimates of the business potential and earnings prospects of
the Company, an overall assessment of the Company, an assessment of the
Company's management and the consideration of the above factors in relation to
market valuation of companies in related businesses. There can be no assurance
that an active trading market will develop for the Common Stock or that the
Common Stock will trade in the public market subsequent to the Offering at or
above the initial public offering price.
Until the distribution of the Common Stock is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase shares of Common Stock. As an exception to these
rules, the Representatives are permitted to engage in certain transactions that
stabilize the price of the Common Stock. Such transactions may consist of bids
or purchases for the purposes of pegging, fixing or maintaining the price of the
Common Stock.
If the Underwriters over-allot (I.E., if they sell more shares of Common
Stock than are set forth on the cover page of this Prospectus), and thereby
create a short position in the Common Stock in connection with the Offering, the
Representatives may reduce that short position by purchasing Common Stock in the
open market. The Representatives also may elect to reduce any short position by
exercising all or part of the over-allotment option described herein.
The Representatives also may impose a penalty bid on certain Underwriters
and selling group members. This means that, if the Representatives purchase
shares of Common Stock in the open market to reduce the Underwriters' short
position or to stabilize the price of the Common Stock, they may reclaim the
amount of the selling concession from the Underwriters and selling group members
who sold those shares as part of the Offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
the Offering.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that the
Representatives will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
At the request of the Company, the Underwriters have reserved up to 125,000
of the shares of Common Stock offered hereby for sale at the initial public
offering price to employees of the Company and other persons associated with the
Company.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales of shares of Common Stock offered hereby to accounts
over which they exercise discretionary authority.
54
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Jackson Walker L.L.P., Houston, Texas. Certain legal
matters in connection with the sale of the Common Stock offered hereby will be
passed upon for the Underwriters by Baker & Botts, L.L.P., Houston, Texas.
EXPERTS
The financial statements of Pentegra Dental Group, Inc. as of September 30,
1997 and for the period from inception, February 21, 1997, through September 30,
1997, as detailed in the index on page F-1, included in this Prospectus, have
been audited by Coopers & Lybrand L.L.P., independent accountants, as indicated
in their report with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all exhibits, schedules and amendments relating thereto, the
"Registration Statement") with respect to the Common Stock offered hereby. This
Prospectus, filed as part of the Registration Statement, does not contain all
the information contained in the Registration Statement, certain portions of
which have been omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement including
the exhibits and schedules thereto. Statements contained in this Prospectus as
to the contents of any contract or other document filed as an exhibit to the
Registration Statement accurately describe the material provisions of such
document and are qualified in their entirety by reference to such exhibits for
complete statements of their provisions. All of these documents may be inspected
without charge at the Public Reference Section of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the
following regional offices of the Commission: Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center, 13th
Floor, New York, New York 10048. Copies can also be obtained from the Commission
at prescribed rates. The Commission maintains a Web site (http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
55
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Pentegra Dental Group, Inc. Unaudited Pro Forma Balance Sheet.............................................. F-2
Unaudited Pro Forma Balance Sheet as of September 30, 1997............................................... F-3
Notes to Unaudited Pro Forma Balance Sheet............................................................... F-4
Pentegra Dental Group, Inc. Financial Statements
Report of Independent Public Accountants................................................................. F-6
Balance Sheet as of September 30, 1997................................................................... F-7
Statement of Operations for the period from inception,
February 21, 1997, through September 30, 1997.......................................................... F-8
Statement of Changes in Stockholders' Deficit for the period from inception, February 21, 1997, through
September 30, 1997..................................................................................... F-9
Statement of Cash Flows for the period from inception, February 21, 1997, through September 30, 1997..... F-10
Notes to Financial Statements............................................................................ F-11
</TABLE>
F-1
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
The unaudited pro forma balance sheet dated September 30, 1997 of Pentegra
Dental Group, Inc. (together with its parent entity, Pentegra Investments, Inc.,
"Pentegra" or the "Company") has been prepared as if (a) the acquisition by the
Company of certain assets and assumption of certain liabilities of 50 dental
practices (the "Founding Affiliated Practices") for consideration consisting of
a combination of cash and shares of its common stock, par value $.001 per share
(the "Common Stock"), and the execution of agreements to provide management
services to the Founding Affiliated Practices (collectively, the
"Affiliations"), (b) the repayment of certain debt of the Founding Affiliated
Practices, (c) the acquisition by the Company (the "Pentegra/Napili
Transaction") of certain assets of Pentegra, Ltd. and Napili, International
("Napili"), (d) the repurchase by Pentegra Investments, Inc. ("PII") of 245,845
shares of Class B Preferred Stock of PII from affiliates of the Company at the
subscription price per share paid to PII for those shares and the redemption by
PII of an aggregate of 1,337,500 shares of its Class A Preferred Stock and Class
B Preferred Stock for $2.00 per share (the "Repurchase and Redemption"), (e) the
exchange of all outstanding shares of common stock of PII for shares of Common
Stock on a one-for-one basis (the "Share Exchange") (after giving effect to a
repurchase by PII of shares of its common stock, at a purchase price of $.01 per
share, such that the total number of shares of Common Stock issuable in
connection with the Affiliations and the Share Exchange will not exceed
3,941,898 shares) and (f) the initial public offering of 2,500,000 shares of
Common Stock (the "Offering") and the application of the net proceeds therefrom
(as described in "Use of Proceeds, " except for the issuance and repayment of
$350,000 aggregate principal amount outstanding under the Company's 9.5%
promissory notes (the "Promissory Notes") which were issued in October and
November of 1997), all had been completed, as if those transactions had occurred
on September 30, 1997. The Affiliations, the repayment of certain debt of the
Founding Affiliated Practices, the Pentegra/Napili Transaction, the Repurchase
and Redemption, the Share Exchange and the Offering are each contingent on the
occurrence of the others.
The Company will not employ dental professionals or control the practice of
dentistry by the dentists. As the Company will not be acquiring the future
patient revenues to be earned by the Founding Affiliated Practices, the
Affiliations are not deemed to be business combinations. In accordance with the
Securities and Exchange Commission's Staff Accounting Bulletin No. 48,
"Transfers of Nonmonetary Assets by Promoters or Shareholders," the Affiliations
will be accounted for at their historical cost basis with the shares of Common
Stock to be issued in the Affiliations being valued at the historical net book
value of the nonmonetary assets acquired, net of liabilities assumed. The cash
consideration will be reflected as a dividend by the Company to the owners of
the Founding Affiliated Practices. The acquisition of certain assets of
Pentegra, Ltd. and Napili will be accounted for as a purchase in accordance with
Accounting Principles Board Opinion No. 16.
The unaudited pro forma balance sheet has been prepared by the Company based
on the audited historical financial statements of the Company, Pentegra, Ltd.
and Napili included elsewhere in this Prospectus, including the audited combined
financial information of the Founding Affiliated Practices included in the notes
to the Company's financial statements, and assumptions deemed appropriate by the
Company.
The Company has not presented a pro forma statement of operations for the
transactions described above based on the requirements set forth in Article 11
of Regulation S-X, because it is a newly formed entity with no significant
operations to date and no operating history in the business of managing a large
number of geographically diverse dental practices.
F-2
<PAGE>
PENTEGRA DENTAL GROUP, INC.
UNAUDITED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
AFFILIATION OFFERING PRO FORMA,
PENTEGRA ADJUSTMENTS SUBTOTAL ADJUSTMENTS AS ADJUSTED
----------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 354 $ -- $ 354 $ (6,367)(A) $ 9,471(1)
21,650(B)
(200)(C)
(2,789)(D)
(2,749 (E)
(428 (F)
Accounts receivable, net........................ -- -- -- 554 (F) 554
----------- ------------- --------- ------------- ------------
Total current assets.......................... 354 -- 354 9,671 10,025
Property and equipment, net....................... 69 2,698 (A) 2,767 17 (C) 2,784
Deferred offering costs........................... 1,643 -- 1,643 (1,643 (B) --
Other noncurrent assets, net...................... 5 -- 5 183 (C) 188
----------- ------------- --------- ------------- ------------
Total assets.................................. $ 2,071 $ 2,698 $ 4,769 $ 8,228 $ 12,997
----------- ------------- --------- ------------- ------------
----------- ------------- --------- ------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities........ $ 1,006 $ 6,367 (A) $ 7,373 $ (6,367 (A) $ 1,439
(943 (B)
126 (F)
1,250 (G)
Current portion of long-term debt............... -- 746 (A) 746 (746 (E) --
----------- ------------- --------- ------------- ------------
Total current liabilities..................... 1,006 7,113 8,119 (6,680 ) 1,439
Long-term debt.................................... -- 2,003 (A) 2,003 (2,003 (E) --
Class A redeemable preferred stock................ 675 -- 675 (675 (D) --
Class B redeemable preferred stock................ 414 -- 414 (414 (D) --
Stockholders' equity (deficit):
Common stock.................................... 18 2 (A) 20 3 (B) 6
(17 (H)
Additional paid-in capital...................... 708 (6,420 (A) (5,712) 20,947 (B) 13,552
(1,700 (D)
17 (H)
Accumulated deficit............................. (750 ) -- (750) (1,250 (G) (2,000 )
----------- ------------- --------- ------------- ------------
Total stockholders' equity (deficit).......... (24 ) (6,418 ) (6,442) 18,000 11,558
----------- ------------- --------- ------------- ------------
Total liabilities and stockholders' equity
(deficit)................................... $ 2,071 $ 2,698 $ 4,769 $ 8,228 $ 12,997
----------- ------------- --------- ------------- ------------
----------- ------------- --------- ------------- ------------
</TABLE>
- ----------
(1) See "Use of Proceeds."
The accompanying notes are an integral part of this unaudited pro forma
financial statement.
F-3
<PAGE>
PENTEGRA DENTAL GROUP, INC.
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
The accompanying unaudited pro forma balance sheet as of September 30, 1997
gives effect to the Affiliations, the payment of debt assumed from the Founding
Affiliated Practices, the Pentegra/Napili Transaction, the Repurchase and
Redemption, the Share Exchange and the Offering and the application of the
proceeds therefrom (as described in "Use of Proceeds," except for the issuance
and repayment of $350,000 aggregate principal amount outstanding under the
Promissory Notes, which were issued in October and November 1997), as if those
transactions had occurred on September 30, 1997. The unaudited pro forma balance
sheet does not represent the historical or future financial position of the
Company.
(A) Reflects completion of the Affiliations, which will involve (i) the issuance
of 2,622,269 shares of Common Stock, valued at the historical net book value
of the assets transferred less the liabilities assumed, and (ii) cash
distributions to be treated as dividends aggregating $6,367,000. The
historical net book value of the assets transferred and the liabilities
assumed from the Founding Affiliated Practices are as follows (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Property and equipment transferred.................................................. $ 2,698
Less
Current portion of notes payable.................................................. (746)
Long-term portion of notes payable................................................ (2,003)
---------
Liabilities assumed, net of assets transferred.................................. $ (51)
---------
---------
</TABLE>
Certain assets and liabilities will not be transferred from the Founding
Affiliated Practices. The assets not transferred are cash, certain accounts
receivable, prepaids and other current assets, and certain accounts payable.
(B) Reflects the issuance of 2,500,000 shares Common Stock in the Offering, net
of (i) estimated underwriters' discounts and commissions and (ii) estimated
offering costs of $2,300,000 primarily consisting of legal, accounting and
printing expenses, less offering costs previously funded with proceeds from
the issuance of capital stock of PII, including all PII Class A Preferred
Stock and Class B Preferred Stock, and the Promissory Notes. The resulting
net proceeds are reflected as Common Stock and additional paid-in capital.
The Company has deferred offering costs of $1,643,000, of which $700,000 had
been paid at September 30, 1997.
(C) Reflects completion of the Pentegra/Napili Transaction for consideration of
$200,000 cash. As of September 30, 1997, the assets to be acquired in the
Pentegra/Napili Transaction have a fair value of approximately $17,000. The
cost in excess of the fair value of the net tangible assets acquired will be
amortized over a five-year period.
(D) Reflects the repurchase of 245,835 shares of Class B Preferred Stock from
affiliates of the Company at the price per share paid to PII for those
shares and the redemption of an aggregate of 1,337,500 shares of Class A
Preferred Stock and Class B Preferred Stock for $2.00 per share and
recognition of
F-4
<PAGE>
PENTEGRA DENTAL GROUP, INC.
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
the related deemed dividend of $1,700,000. The cash payment for the
Repurchase and Redemption and dividend are as follows (in thousands):
<TABLE>
<S> <C>
Cash payment for Repurchase......................................... 114
Cash payment for Redemption......................................... 2,675
---------
2,789
Less
Value of Class A and B preferred stock at September 30, 1997...... 1,089
---------
Dividend to Class A and B preferred stockholders.................. $ 1,700
---------
---------
</TABLE>
(E) Reflects the use of proceeds from the Offering to repay the debt assumed in
the Affiliations.
(F) Reflects the purchase of net monetary assets from the Founding Affiliated
Practices for cash of $428,000, which assets will be recorded at fair value.
The fair value of the net assets purchased are as follows (in thousands):
<TABLE>
<S> <C>
Accounts receivable, net............................................. $ 554
Less
Accounts payable................................................... (126)
---------
Total................................................................ $ 428
---------
---------
</TABLE>
(G) Reflects the accrual of an employment bonus of $1,250,000 to the Chairman of
the Board of Directors (the "Chairman"). Payment of the bonus will be made
in increments of $10,000 on the closing of each future dental practice
affiliation until the bonus has been paid in full. Management expects the
bonus will be paid within the year following the Offering. In any event,
pursuant to the terms of the Company's employment agreement with the
Chairman, the employment bonus must be paid in full within three years of
the Offering. The bonus will be expensed in the fourth quarter of 1997
because its payment is not contingent on future services actually being
provided by the Chairman.
(H) Reflects repurchase by PII of 437,038 shares of its common stock and the
exchange at the closing of the offering of 1,319,629 shares of $0.001 par
value common stock of Pentegra Dental Group, Inc. for 1,319,629 shares of
$0.01 par value common stock of PII.
F-5
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Pentegra Dental Group, Inc.:
We have audited the accompanying balance sheet of Pentegra Dental Group,
Inc. as of September 30, 1997, and the related statements of operations, changes
in stockholders' deficit, and cash flows for the period from inception, February
21, 1997, through September 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Pentegra Dental Group, Inc.
as of September 30, 1997, and the results of its operations and its cash flows
for the period from inception, February 21, 1997, through September 30, 1997 in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Houston, Texas
December 10, 1997
F-6
<PAGE>
PENTEGRA DENTAL GROUP, INC.
BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................... $ 354
---------
Total current assets............................................................ 354
---------
Property and equipment.............................................................. 69
Deferred offering costs............................................................. 1,643
Organizational costs................................................................ 5
---------
Total assets................................................................ $ 2,071
---------
---------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities.......................................... $ 1,006
---------
Total current liabilities....................................................... 1,006
---------
Commitments and contingencies (See Notes)...........................................
Class A redeemable preferred stock, $0.01 par value, 5,000,000 shares authorized,
900,000 shares issued and outstanding (liquidation preference of $900)............ 675
Class B redeemable preferred stock, $0.01 par value, 5,000,000 shares authorized,
683,335 shares issued and outstanding (liquidation preference of $683)............ 414
Stockholders' deficit:
Common stock, $0.01 par value, 40,000,000 shares authorized, 1,756,667 shares
issued and outstanding.......................................................... 18
Additional paid-in capital.......................................................... 708
Accumulated deficit................................................................. (750)
---------
Total stockholders' deficit..................................................... (24)
---------
Total liabilities and stockholders' deficit................................. $ 2,071
---------
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
PENTEGRA DENTAL GROUP, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION, FEBRUARY 21, 1997, THROUGH SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Revenue............................................................................. $ --
<S> <C>
Expenses:
General and administrative expenses............................................... 411
Compensation expense in connection with issuance of common stock.................. 339
---------
Total expenses................................................................ 750
---------
Net loss............................................................................ $ (750)
---------
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-8
<PAGE>
PENTEGRA DENTAL GROUP, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM INCEPTION, FEBRUARY 21, 1997, THROUGH SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------------ PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT DEFICIT
----------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at February 21, 1997........................... -- $ -- $ -- $ -- $ --
Issuance of common stock
($0.01 per share cash on February 21, 1997).......... 667 7 3 -- 10
Issuance of common stock
($0.01 per share cash and $0.14 per share
compensation on May 22, 1997)........................ 767 8 107 -- 115
Issuance of common stock
($1.27 per share cash on June 13, 1997).............. 290 3 365 -- 368
Issuance of common stock
($0.01 per share cash and $1.26 per share
compensation on June 13, 1997)....................... 33 -- 42 -- 42
Purchases of common stock.............................. (67) (1) -- -- (1)
Issuance of common stock ($0.01 per share cash and
$2.87 per share compensation on September 1, 1997)... 67 1 191 -- 192
Net loss............................................... -- -- -- (750) (750)
----- ----- ----- ----- -----
Balance at June 30, 1997............................... 1,757 $ 18 $ 708 $ (750) $ (24)
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-9
<PAGE>
PENTEGRA DENTAL GROUP, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION, FEBRUARY 21, 1997, THROUGH SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
Cash flows from operating activities:
<S> <C>
Net loss.......................................................................... $ (750)
Compensation associated with issuance of common stock............................. 339
Increase in accounts payable and accrued liabilities.............................. 63
---------
Net cash used by operating activities......................................... (348)
---------
Net cash used in investing activities--additions to property and equipment.......... (69)
---------
Cash flows provided by financing activities:
Proceeds from issuance of common and preferred stock.............................. 1,476
Offering costs.................................................................... (700)
Organizational costs.............................................................. (5)
---------
Net cash provided by financing activities..................................... 771
---------
Net increase in cash and cash equivalents........................................... 354
Balance at inception, February 21, 1997............................................. --
---------
Balance at September 30, 1997....................................................... $ 354
---------
---------
Non-cash financing activities:
Offering costs accrued............................................................ $ 943
---------
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-10
<PAGE>
PENTEGRA DENTAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
Pentegra Dental Group, Inc. (the "Company") was organized as a Delaware
corporation on February 21, 1997, for the purpose of creating a dental practice
management company.
In July 1997, the Company changed its name to Pentegra Investments, Inc. and
formed a new wholly owned subsidiary named Pentegra Dental Group, Inc.
("Pentegra Dental"). Pentegra Dental's operations to date have consisted
primarily of seeking affiliations with dental practices, negotiating to acquire
the tangible assets of those practices, and negotiating agreements to provide
management services to those practices. Pentegra Dental plans to complete an
initial public offering of its common stock, par value $0.001 per share (the
"Offering") and simultaneously exchange cash and shares of its common stock for
selected assets and liabilities (the "Affiliations") of 50 dental practices (the
"Founding Affiliated Practices" and, together with dental practices with which
the Company may enter into similar transactions in the future, the "Affiliated
Practices") (see Note 4). Additionally, the current shareholders will exchange
on a share-for-share basis, all of their shares of the Company's common stock,
par value $0.01 per share, for shares of common stock of Pentegra Dental. It is
contemplated that 245,835 shares of Class B preferred stock held by affiliates
of the Company will be repurchased at their original issuance prices ranging
from $0.01 to $1.00 per share and 1,337,500 shares of Class A and Class B
preferred stock held by nonaffiliates will be redeemed at a price of $2.00 per
share with the proceeds of the Offering. Pentegra Dental has also entered into
an agreement to acquire substantially all the assets and operations of a dental
management consulting firm, Pentegra, Ltd., and a dental management seminar
company, Napili, International (the "Pentegra/Napili Transaction") (see Note 3).
The Affiliations, the Pentegra/Napili Transaction and the Offering are each
contingent on the occurrence of the others.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are defined as highly liquid financial instruments
with maturities of three months or less at the date of purchase.
DEFERRED OFFERING COSTS
Deferred offering costs include legal, accounting and other costs directly
related to the Offering. All deferred offering costs will be charged against the
proceeds of the Offering upon its completion. Such costs would be charged to
expense if the Offering were not completed.
ORGANIZATIONAL COSTS
Organizational costs are being amortized on a straight-line basis over a
five-year period.
STOCK OPTION PLAN
In September 1997, the board of directors of Pentegra Dental adopted the
1997 Stock Compensation Plan (the "Plan"). Employees, non-employee directors and
advisors and directors will be eligible to receive awards under the Plan and
only employees of the Company will be eligible to receive incentive stock
options. The aggregate number of options to purchase shares of common stock and
other awards of shares of common stock that may be granted under the Plan may
not exceed 2,000,000 shares. As of September 30, 1997, Pentegra Dental had
authorized for issuance options to acquire approximately 647,000 shares to
employees, practice employees and directors on the date the initial public
offering price is determined.
F-11
<PAGE>
PENTEGRA DENTAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
The exercise price of these options will be the initial public offering price
per share. The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation," which establishes
accounting and reporting standards for stock-based compensation plans. The
Company will account for options issued to employees and non-employee directors
under the Plan in accordance with APB Opinion No. 25 and provide disclosure of
the pro forma effect of using the fair value of options granted to employees to
measure compensation. Of the amounts authorized as of September 30, 1997,
options to purchase approximately 57,000 shares will be issued to owners of
Founding Affiliated Practices, practice employees and other advisors. The fair
value of such options will be charged to operations over their vesting period.
EARNINGS PER SHARE
Earnings per share has been excluded from the financial statements because
the Company has limited historical operations and does not have a significant
operating history.
USE OF ESTIMATES
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may in some instances differ from previously
estimated amounts.
INCOME TAXES
The Company utilizes the liability method of accounting for income taxes.
Under this method, deferred taxes are determined based on differences between
the financial reporting and tax bases of assets and liabilities and are measured
using the enacted marginal tax rates currently in effect when the differences
reverse.
As reflected in the accompanying statement of operations, the Company
incurred a net loss of $750,000 during the period from inception, February 21,
1997, through September 30, 1997. The Company has recognized no tax benefit from
this net loss. Due to the limited operations of the Company since its inception,
a valuation allowance has been established to offset the deferred tax asset
related to these net losses that have been capitalized for tax purposes. There
is no other significant difference in the tax and book bases of the Company's
assets or liabilities that would give rise to deferred tax balances.
RECENT PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings Per Share." SFAS No. 128 specifies the computation,
presentation, and disclosure requirements of earnings per share and supersedes
Accounting Principles Board Opinion No. 15, "Earnings Per Share." SFAS No. 128
requires a dual presentation of basic and diluted earnings per share. Basic
earnings per share, which excludes the impact of common stock equivalents,
replaces primary earnings per share. Diluted earnings per share, which utilizes
the average market price per share as opposed to the greater of the average
market price per share or ending market price per share when applying the
treasury stock
F-12
<PAGE>
PENTEGRA DENTAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
method in determining common stock equivalents, replaces fully diluted earnings
per share. SFAS No. 128 is effective for both interim and annual periods ending
after December 15, 1997.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," and SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information." SFAS No. 130 establishes standards for reporting and
displaying comprehensive income and its components in a full set of general
purpose financial statements. SFAS No. 131 establishes standards for reporting
segment information by public enterprises in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports to shareholders. Both these statements are
effective for fiscal years beginning after December 15, 1997. The Company
believes implementation of SFAS Nos. 130 and 131 will not have a material effect
on its financial position, results of operations or cash flows.
The Emerging Issues Task Force of the FASB is currently evaluating certain
matters relating to the physician practice management industry, which the
Company expects will include a review of accounting for affiliated dental
practices. The Company is unable to predict the impact, if any, that this review
may have on Pentegra Dental's financial statement presentation.
3. RELATED PARTY TRANSACTIONS:
Pentegra Dental has entered into an agreement with the Chairman of its Board
of Directors effective at the date the Offering closes, to purchase
substantially all the assets and the operations of Pentegra, Ltd. and Napili,
International for cash consideration of $200,000. Pentegra Dental will enter
into an employment agreement in the fourth quarter of 1997, that provides for
the payment to the Chairman of the Board of Directors of an employment bonus of
$1,250,000. The bonus is due in installments of $10,000 on the closing of each
future dental practice affiliation subsequent to the Affiliations. However, the
bonus must be paid in full within three years. The employment bonus will be
charged to operations in the fourth quarter of 1997 because its payment is not
contingent on any future services to be provided by the Chairman.
Since the Company's inception, it has occupied and had access to the
facilities, equipment and staff of a relative of an executive officer and
director of the Company. Prior to June 1, 1997, that use was insignificant.
Effective June 1, 1997, the Company has agreed to compensate the affiliate for
use of and access to its office facilities, equipment and staff at the rate of
$10,000 per month.
The Company has agreed to lease a portion of the office facilities,
equipment and staff of Pentegra, Ltd., which is wholly owned by the Company's
Chairman of the Board. The Company has agreed to compensate Pentegra, Ltd. for
use of and access to its office facilities, equipment and staff at the rate of
$11,000 per month until the Pentegra/Napili Transaction is completed, whereupon
the entire lease of those facilities will be assumed by Pentegra Dental.
The Company believes that the compensation being paid to these related
parties represents the fair market value of the services that are being provided
to the Company.
4. PLANNED TRANSACTIONS:
Pentegra Dental plans to complete the Affiliations through a series of
mergers and asset transfers. Owners of the Founding Affiliated Practices (the
"Promoters") will receive shares of Common Stock having a value of approximately
$26.2 million, based on the initial public offering price (2,622,269 shares of
F-13
<PAGE>
PENTEGRA DENTAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. PLANNED TRANSACTIONS: (CONTINUED)
Common Stock, based on an assumed initial public offering price of $10.00 per
share), and approximately $6,400,000 in cash. In December 1997, the owners of
the outstanding shares of common stock of PII agreed that, in the event the
initial public offering price is less than $12.00 per share, PII will repurchase
from those stockholders, on a pro rata basis, at a purchase price of $.01 per
share, that number of shares as will be necessary so that the aggregate number
of shares of Common Stock issuable in connection with the Affiliations and the
Share Exchange will not exceed 3,941,898 shares. Pursuant to that agreement,
assuming an initial public offering price of $10.00 per share, PII would
repurchase approximately 24.9% of each such stockholder's shares of PII common
stock, or an aggregate of 437,038 shares. Each Founding Affiliated Practice
transaction was individually negotiated between the Company and the Founding
Affiliated Practice as to all material terms, including, but not limited to,
valuation. The shares to be issued were based on a common allocation method that
considered each Founding Affiliated Practice's gross revenue, net of certain
operating expenses, and the Company's assessment of growth potential. No
independent appraisals of the Founding Affiliated Practices were obtained. Of
the total consideration for each transaction, each Founding Affiliated Practice
could elect to receive up to 20% in cash and the balance in shares of Common
Stock. The actual number of shares will be calculated by subtracting the cash
portion from the total consideration and dividing the resulting amount by the
initial public offering price per share. The assets to be transferred in the
Affiliations include supplies inventory, equipment and certain other current and
non-current assets. The liabilities to be transferred primarily consist of
long-term debt. In connection with the Affiliations, the Promoters and their
professional corporations, professional associations or other entities
(collectively, the "PCs") will enter into long-term service agreements with
Pentegra Dental (the "Service Agreements"). Additionally, those Promoters will
enter into employment and noncompete agreements with their respective PCs.
Pentegra Dental will not employ dentists or control the practice of
dentistry by the dentists employed by the PCs. As Pentegra Dental will be
executing management service agreements and will not hold any equity ownership
in the PCs, the Affiliations are deemed not to be business combinations. Because
each of the owners of the Founding Affiliated Practices is a promoter of the
Offering, Securities and Exchange Commission's Staff Accounting Bulletin No. 48,
"Transfers of Nonmonetary Assets by Promoters or Shareholders" requires (i) the
transferred nonmonetary assets to be accounted for at the historical cost basis
of the Founding Affiliated Practices, (ii) any monetary assets and assumed
monetary liabilities included in the Affiliations to be recorded at fair value
and (iii) cash consideration paid and assumed liabilities in excess of net
assets transferred, to be reflected as a dividend paid by Pentegra Dental.
The information set forth below assumes all the Founding Affiliated
Practices will participate in the Affiliations. Although management expects that
all the practices will participate, there is no assurance that will be the case.
F-14
<PAGE>
PENTEGRA DENTAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. PLANNED TRANSACTIONS: (CONTINUED)
The net assets to be transferred and liabilities to be assumed from the
Founding Affiliated Practices are summarized, on a combined basis, in the
following table (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------ SEPTEMBER 30,
1997
-------------
(UNAUDITED)
<S> <C> <C>
Property, equipment and improvements, net....................... 2,912 2,698
------------ -------------
Assets transferred............................................ 2,912 2,698
Current portion of notes payable................................ (1,078) (746)
Long-term portion of notes payable.............................. (1,411) (2,003)
------------ -------------
Net assets transferred, net of liabilities assumed............ $ 423 $ (51)
------------ -------------
------------ -------------
</TABLE>
The Company will also purchase certain net monetary assets from the founding
Affiliated Practices for a cash amount of $428,000. The net assets purchased
will be recorded at their fair value as of September 30, 1997. The fair value of
the net monetary assets to be acquired as of September 30, 1997 was as follows
(in thousands):
<TABLE>
<CAPTION>
Accounts receivable, net....................................... $ 554
<S> <C>
Less accounts payable.......................................... (126)
-----
Net monetary assets to be acquired........................... $ 428
-----
-----
</TABLE>
Upon consummation of the Affiliations, Pentegra Dental will enter into a
Service Agreement with each Founding Affiliated Practice under which Pentegra
Dental will become the exclusive manager and administrator of non-dental
services relating to the operation of the Founding Affiliated Practices. The
actual terms of the various Service Agreements vary from the description below
on a case-by-case basis, depending on negotiations with the individual Founding
Affiliated Practices and the requirements of applicable law and governmental
regulations.
The management service revenues that will be earned by Pentegra Dental
subsequent to the closing of the Affiliations and the execution of the Service
Agreements will be based on various arrangements. In general, the resulting fee
will be based primarily on the patient revenues less operating expenses
associated with each PC excluding dentists' salaries and depreciation. Patient
revenues are determined based on net patient revenues, as determined under
generally accepted accounting principles, including adjustments for contractual
allowances and other discounts, less an adjustment for uncollectable accounts.
The Company will pay all operating expenses incurred by each Affiliated Practice
that are required to operate a dental office, and the Affiliated Practice will
be responsible for reimbursing the Company for such expenses. These expenses
will include the following:
- Salaries, benefits, payroll taxes, workers compensation, health insurance
and other benefit plans, and other direct expenses of all employees of the
Company at each location of the Affiliated Practice, excluding those costs
associated with the dentists and any other classification of employee
which the Company is prohibited from employing by law;
- Direct costs of all employees or consultants that provide services to each
location of the Affiliated Practice;
- Dental and office supplies, as permitted by law;
F-15
<PAGE>
PENTEGRA DENTAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. PLANNED TRANSACTIONS: (CONTINUED)
- Lease or rent payments, as permitted by law, and utilities, telephone and
maintenance expenses for practice facilities;
- Property taxes on the Company's assets located at the Affiliated
Practice's offices;
- Property, casualty, liability and malpractice insurance premiums relating
to the operations of the Affiliated Practice;
- Dentist recruiting expenses relating to the operations of the Affiliated
Practice; and
- Advertising and other marketing costs attributable to the promotion of the
Affiliated Practice's offices.
All of the above expenses will be incurred and paid by the Company directly
to the third-party provider of the goods or services indicated. In exchange for
incurring these expenses and providing management services, the Company will
record revenues in amounts equal to those incurred expenses, which the
Affiliated Practice will reimburse to the Company, together with a service fee
based on the type of Service Agreement entered into by the Affiliated Practice.
The Founding Affiliated Practices will retain responsibility for the payment
of any and all direct employment expenses, including benefits, for any dentist
or other employee that the Company is prohibited from employing by law.
The Company's standard form of Service Agreement (the "Standard Contract")
will be applied to all practices operating in jurisdictions where permitted. In
those instances where the Standard Contract may not be permitted by applicable
law, an alternative form of Service Agreement (the "Alternative Contract") will
be used. In any jurisdiction where neither the Standard Contract nor the
Alternative Contract is permitted, the service fee will be based on a fixed fee
(the "fixed-fee agreements") that will be subject to annual renegotiation or
adjustment. The patient revenues and operating expenses (excluding depreciation
and dentists' salaries) of the Founding Affiliated Practices are summarized, on
a combined basis, in the following tables for the year ended December 31, 1996
and the nine months ended September 30, 1997 (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
----------------------
PATIENT OPERATING
REVENUES EXPENSES
--------- -----------
<S> <C> <C>
Practices participating under the Standard Contract..................... $ 29,233 $ 17,420
Practices participating under the Alternative Contract.................. 6,059 4,269
Practices participating under fixed-fee agreements...................... 2,599 1,393
--------- -----------
Totals for Founding Affiliated Practices................................ $ 37,891 $ 23,082
--------- -----------
--------- -----------
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1997
----------------------
PATIENT OPERATING
REVENUES EXPENSES
--------- -----------
(UNAUDITED)
<S> <C> <C>
Practices participating under the Standard Contract..................... $ 22,153 $ 12,535
Practices participating under the Alternative Contract.................. 4,958 3,617
Practices participating under fixed-fee agreements...................... 1,893 1,112
--------- -----------
Totals for Founding Affiliated Practices................................ $ 29,004 $ 17,264
--------- -----------
--------- -----------
</TABLE>
F-16
<PAGE>
PENTEGRA DENTAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. PLANNED TRANSACTIONS: (CONTINUED)
Subsequent to the Affiliations, the operating expenses of the Founding
Affiliated Practices (excluding dentists' salaries) will be paid by Pentegra
Dental and billed to the PCs. The historical operating expenses of the Founding
Affiliated Practices for the year ended December 31, 1996 and the nine months
ended September 30, 1997 that will be assumed by Pentegra Dental excluding those
employment expenses for any dentist or other employee that the Company is
prohibited from employing by law, in the future are summarized, on a combined
basis, in the following table (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------ NINE MONTHS
ENDED
SEPTEMBER 30,
1997
-------------
(UNAUDITED)
<S> <C> <C>
Salaries, wages and benefits of employees, excluding the
dentists...................................................... $ 8,495 $ 6,432
Dental supplies................................................. 5,680 4,340
Rent............................................................ 1,884 1,395
Advertising and marketing expenses.............................. 567 400
General and administrative expenses............................. 5,716 4,116
Other expenses.................................................. 740 581
------------ -------------
Total operating expenses.................................... 23,082 17,264
Depreciation and amortization................................... 879 699
------------ -------------
Total expenses.............................................. $ 23,961 $ 17,963
------------ -------------
------------ -------------
</TABLE>
The Company will continue to recognize depreciation and amortization on
assets transferred in connection with the Affiliations. However, such charges
are not considered operating expenses under the Service Agreements and will not
enter into the calculation of the service fees.
The combined historical financial information of the Founding Affiliated
Practices presented herein is not related to the financial position or results
of operations of Pentegra Dental or the Company. This information is presented
solely for the purpose of providing disclosures to potential investors regarding
the group of entities with which Pentegra Dental will be contracting to provide
future services. The Founding Affiliated Practices were not operated under
common control or management during the fiscal year ended December 31, 1996 or
the nine months ended September 30, 1997.
5. REDEEMABLE PREFERRED STOCK
In May 1997, the Company authorized the designation, out of the authorized
and unissued preferred stock, of two classes of 5,000,000 shares each,
designated as "Class A" and "Class B." In May 1997, the Company issued 133,335
shares of Class B nonvoting preferred stock for cash of approximately $1,000. In
June 1997, the Company issued 900,000 shares of Class A nonvoting preferred
stock, 550,000 shares of Class B nonvoting preferred stock and 435,000 shares of
common stock for $1,457,000. The Company allocated $675,000 of the proceeds to
the Class A preferred stock, $413,000 to the Class B preferred stock and
$369,000 to the common stock based on the value of $0.75, $0.75 and $0.85 per
share, respectively, as determined by an independent valuation of the fair value
of those shares as of the date of issuance. The proceeds from these stock
issuances were reserved for legal and accounting costs associated with the
Offering, as well as operating costs. Holders of both classes of preferred stock
are entitled to per share dividends equivalent to any dividends that may be
declared on the common stock, but not to cumulative
F-17
<PAGE>
PENTEGRA DENTAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. REDEEMABLE PREFERRED STOCK (CONTINUED)
dividends. The preferred stock entitles the holders thereof to preference in
liquidation over the common stock.
The Company will repurchase 245,835 shares of its Class B preferred stock
held by affiliates of the Company at repurchase prices equal to the subscription
prices, which ranged from $0.01 to $1.00 per share (aggregating to $114,000),
and the remaining 1,337,500 shares of Class A and B preferred stock outstanding
will be redeemed at a price of $2.00 per share (aggregating to $2,675,000) with
a portion of the net proceeds of the Offering. The value of the preferred stock
has not been accreted to the redemption value because the date of the Offering
was not determinable at December 10, 1997. The Company will recognize a dividend
at the date of redemption.
6. COMMON STOCK
All share information in the accompanying financial statements have been
retroactively restated to reflect a two-for-three share reverse stock split of
the Company's common stock, which was effected in October 1997.
In February 1997, the Company issued 666,667 shares of common stock for cash
at a price of $0.01 per share. The Company issued an additional 766,667 shares
of common stock to members of management during May 1997 for cash at a price of
$0.01 per share. The Company valued these shares at $0.15 per share, based on an
independent valuation of the fair value of those shares as of the date of
issuance. In June 1997, in addition to the 290,000 shares of common stock issued
in connection with the issuance of the Class A and Class B preferred stock,
described in Note 5 above, the Company issued 33,333 shares of common stock for
cash at a price of $0.01 per share. Those shares were valued at $1.27 per share,
based on an independent valuation of the fair value of those shares as of the
date of issuance.
In September 1997, the Company repurchased 66,667 shares of its common stock
at a purchase price of $0.01 per share, of which 46,667 shares were repurchased
from a director of the Company. The Company issued 66,667 shares of common stock
to a member of management at a purchase price of $0.01 per share. Those shares
were valued at $2.88 per share, based on an independent valuation of the fair
value of those shares as of the date of issuance. The differences between the
cash received for shares of common stock and the fair value of those shares as
of the respective dates of issuance have been recognized as compensation
expense.
7. SUBSEQUENT EVENTS
In October 1997, the Company repurchased an additional 20,000 shares of its
common stock from a director at a purchase price per share of $0.01, and issued
(i) 20,000 shares of common stock for a purchase price of $0.01 and (ii)
$300,000 of 9.5% promissory notes due on the earlier of 30 days after the
closing of the Offering or October 1998. The Company will record the value of
the shares based on an independent valuation of those shares as of the date of
issuance. The difference between the cash received for those shares of common
stock and the fair value of those shares will be recognized as a discount on the
promissory notes. The Company will accrete the discount over the term of the
promissory notes.
In November 1997, the Company authorized (i) options to purchase 25,000
shares of common stock at the Offering price per share (bringing the total
number of shares subject to options authorized through November 1997 to
approximately 672,000) and (ii) the issuance of an additional $50,000 of 9.5%
promissory notes due on the earlier of 30 days after the closing of the Offering
or November 1998.
F-18
<PAGE>
- ---------------------------------------------------------
---------------------------------------------------------
- ---------------------------------------------------------
---------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED ON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN
THE SHARES OF COMMON STOCK TO WHICH IT RELATES OR ANY OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary................................ 3
Risk Factors...................................... 8
The Company....................................... 16
Use of Proceeds................................... 17
Dividend Policy................................... 17
Dilution.......................................... 18
Capitalization.................................... 19
Selected Financial Data........................... 20
Management's Discussion and Analysis of Financial
Condition and Results of Operations............. 21
Business.......................................... 26
Management........................................ 36
Certain Transactions.............................. 43
Security Ownership of Certain Beneficial Owners
and Management.................................. 47
Description of Capital Stock...................... 48
Shares Eligible for Future Sale................... 50
Underwriting...................................... 53
Legal Matters..................................... 55
Experts........................................... 55
Additional Information............................ 55
Index to Financial Statements..................... F-1
</TABLE>
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS.THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2,500,000 SHARES
PENTEGRA DENTAL GROUP, INC.
COMMON STOCK
-------------------
PROSPECTUS
, 1998
---------------------
LEHMAN BROTHERS
RAUSHER PIERCE REFSNES, INC.
- ---------------------------------------------------------
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- ---------------------------------------------------------
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be paid by the Company (other
than underwriting compensation expected to be incurred) in connection with the
offering described in this Registration Statement. All amounts are estimates,
except the SEC Registration Fee, the NASD Filing Fee and the American Stock
Exchange.
<TABLE>
<S> <C>
SEC Registration Fee............................................ $ 12,197
NASD Filing Fee................................................. 4,525
American Stock Exchange Listing Fee............................. 35,000
Blue Sky Fees and Expenses...................................... 10,000
Printing Costs.................................................. 150,000
Legal Fees and Expenses......................................... 350,000
Accounting Fees and Expenses.................................... 1,600,000
Transfer Agent and Registrar Fees and Expenses.................. 5,000
---------
Miscellaneous................................................... 133,278
---------
Total......................................................... $2,300,000
---------
---------
</TABLE>
- ---------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
DELAWARE GENERAL CORPORATION LAW
Section 145(a) of the General Corporation Law of the State of Delaware (the
"DGCL") provides that a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that the
person's conduct was unlawful.
Section 145(b) of the DGCL states that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that the
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or settlement
of such action or suit if the person acted in good
II-1
<PAGE>
faith and in a manner the person reasonably believed to be in or not opposed to
the best interests of the corporation and except that no indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
Section 145(c) of the DGCL provides that to the extent that a director,
officer, employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
Section 145(d) of the DGCL states that any indemnification under subsections
(a) and (b) of Section 145 (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
subsections (a) and (b). Such determination shall be made (1) by a majority vote
of the directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) if there are no such directors or, if such
directors so direct, by independent legal counsel in a written opinion, or (3)
by the stockholders.
Section 145(e) of the DGCL provides that expenses (including attorneys'
fees) incurred by an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation as authorized in Section 145. Such
expenses (including attorneys' fees) incurred by other employees and agents may
be so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
Section 145(f) of the DGCL states that the indemnification and advancement
of expenses provided by, or granted pursuant to, the other subsections of
Section 145 shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office.
Section 145(g) of the DGCL provides that a corporation shall have the power
to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of Section 145.
Section 145(j) of the DGCL states that the indemnification and advancement
of expenses provided by, or granted pursuant to, Section 145 shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
RESTATED CERTIFICATE OF INCORPORATION
The Restated Certificate of Incorporation of the Company provides that a
director of the Company shall not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability for unlawful payments of dividends or unlawful stock
II-2
<PAGE>
repurchases or redemptions as provided for in Section 174 of the DGCL. If the
DGCL is amended to authorize the further elimination or limitation of the
liability of directors, then the liability of a director of the Company, in
addition to the limitation on personal liability described above, shall be
limited to the fullest extent permitted by the amended DGCL. Further, any repeal
or modification of such provision of the Certificate of Incorporation by the
stockholders of the Company shall be prospective only, and shall not adversely
affect any limitation on the personal liability of a director of the Company
existing at the time of such repeal or modification.
BYLAWS
The Bylaws of the Company provide that the Company will indemnify any
director or officer of the Company to the fullest extent permitted by applicable
law, from and against judgments, fines, amounts paid in settlement and expenses
(including attorneys' fees) whatsoever arising out of any event or occurrence
related to the fact that such person is or was a director or officer of the
Company and further provide that the Company may, but is not required to,
indemnify any employee or agent of the Company or a director, officer, employee
or agent of any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise who is or was serving in such capacity at the
request of the Company; provided, however, that the Company is only required to
indemnify persons serving as directors and officers (and to the extent
authorized by the Board of Directors, such other persons) for the expenses
incurred in a proceeding if such person has met the standards of conduct that
make it permissible under the laws of the State of Delaware for the Company to
indemnify the claimant for the amount claimed. The Bylaws further provide that,
in the event of any threatened, or pending action, suit or proceeding in which
any director or officer of the Company is a party or is involved and that may
give rise to a right of indemnification under the Bylaws, following written
request by such person, the Company will promptly pay to such person amounts to
cover expenses reasonably incurred by such person in such proceeding in advance
of its final disposition upon such person undertaking to repay the advance if it
is ultimately determined that such person is not entitled to be indemnified by
the Company as provided in the Bylaws.
UNDERWRITING AGREEMENT
The Underwriting Agreement provides for the indemnification of the directors
and officers of the Company in certain circumstances.
INSURANCE
The Company intends to maintain liability insurance for the benefit of its
directors and officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following information relates to securities issued or sold by the
Company within the last three years:
(i) In connection with the formation of the Company, on February 22, 1997 PII
issued shares of its common stock to J. Michael Casas (200,000 shares),
James L. Dunn, Jr. (100,000 shares), John G. Thayer (66,667 shares), Allen
M. Gelwick (66,667 shares), Stephen P. Schmitt (33,333 shares), Dunn Family
Trust, James L. Dunn, Jr., Trustee (33,333 shares), JoAn Majors (66,667
shares), John W. Parsons (66,667 shares) and Richard M. Vento (33,333
shares), at a purchase price per share of $0.01. On May 12, 1997, PII
issued Class B Preferred to J. Michael Casas (66,667 shares), James L.
Dunn, Jr. (33,334 shares) and John W. Parsons (33,334 shares), at a
purchase price per share of $0.01. On May 22, 1997, PII issued shares of
its common stock to George M. Siegel (300,000 shares), Omer K. Reed, D.D.S.
(150,000 shares), Gary S. Glatter (100,000 shares), Kelly W. Reed (150,000
shares), Stephen E. Stapleton (33,333 shares) and Kimberlee K. Rozman
(33,333 shares), at a purchase price per share of $0.01. On June 13, 1997,
(i) PII issued shares of its Class A Preferred to Marie Adamo
II-3
<PAGE>
(50,000 shares), Peter Anderson, Aurous, Ltd. (25,000 shares), Scott
Bolding (25,000 shares), William Decker (100,000 shares), Peter Anderson,
Dufo, Ltd. (25,000 shares), Daniel Goldman, Goldfam, Ltd. (75,000 shares),
Peter Anderson, Laguna Enterprises, Ltd. (25,000 shares), James Landers
(50,000 shares), Gary Nagler (25,000 shares), Debra Novosad (50,000
shares), Edward Pitts, P/S Plan (125,000 shares), RTT Investments (150,000
shares), Candy Segall (25,000 shares), Annie Smith (50,000 shares) and Ken
W. Smith (100,000 shares), at a purchase price per share of $1.00; (ii) PII
issued shares of its Class B Preferred to Omer K. Reed, D.D.S. (37,500
shares), Gary S. Glatter (37,500 shares), George M. Siegel (37,500 shares),
Stephen E. Stapleton (12,500 shares), Mack E. Greder, D.D.S. (25,000
shares), Roger Allen Kay, D.D.S. (25,000 shares), Debra Novosad (50,000
shares), Bruce A. Kanehl, D.D.S. (25,000 shares), George King, D.D.S.
(25,000 shares), Brian K. Kniff, D.D.S. (25,000 shares), Richard W. Mains,
D.D.S., RBM Trust (25,000 shares), James W. Medlock, D.D.S. (25,000
shares), Thomas L. Mullooly, D.D.S. (25,000 shares), Richard H. Fettig,
D.D.S. (25,000 shares), Marvin V. Cavallino, D.D.S. (50,000 shares), Alan
H. Gerbholz, D.D.S. (25,000 shares), Victor H. Burdick, D.D.S. (25,000
shares), Steve Anderson, D.D.S. (25,000 shares) and James P. Allen, D.D.S.
(25,000 shares), at a purchase price per share of $1.00; and (iii) PII
issued shares of its common stock to Omer K. Reed, D.D.S. (7,500 shares),
Gary S. Glatter (7,500 shares), George M. Siegel (7,500 shares), Stephen E.
Stapleton (2,500 shares), Mack E. Greder, D.D.S. (5,000 shares), Roger
Allen Kay, D.D.S. (5,000 shares), Marie Adamo (10,000 shares), Peter
Anderson, Aurous, Ltd. (5,000 shares), Scott Bolding (5,000 shares),
William Decker (20,000 shares), Peter Anderson, Dufo, Ltd. (5,000 shares),
Daniel Goldman, Goldfam, Ltd. (35,000 shares), Peter Anderson, Laguna
Enterprises, Ltd. (5,000 shares), James Landers (10,000 shares), Gary
Nagler (5,000 shares), Debra Novosad (20,000 shares), Edward Pitts, P/S
Plan (38,333 shares), RTT Investments (30,000 shares), Candy Segall (5,000
shares), Annie Smith (10,000 shares), Ken W. Smith (20,000 shares), Marvin
V. Cavallino, D.D.S. (10,000 shares), Bruce A. Kanehl, D.D.S. (5,000
shares), Richard H. Fettig, D.D.S. (5,000 shares), Victor H. Burdick,
D.D.S. (5,000 shares), Thomas L. Mullooly, D.D.S. (5,000 shares), James W.
Medlock, D.D.S. (5,000 shares), Alan H. Gerbholz, D.D.S. (5,000 shares),
Richard W. Mains, D.D.S., RBM Trust (5,000 shares), Brian K. Kniff, D.D.S.
(5,000 shares), George King, D.D.S. (5,000 shares), Steve Anderson, D.D.S.
(5,000 shares) and James P. Allen, D.D.S. (5,000 shares), at a purchase
price of $0.01 per share. On September 1, 1997, PII issued 66,667 shares of
its common stock to Sam H. Carr at a purchase price of $0.01 per share. On
October 8, 1997, PII issued 6,667 shares of its common stock to Manhattan
Group Funding and 13,333 shares of its common stock to Daniel A. Bock, at a
purchase price of $0.01 per share. Each of the above-mentioned issuances
was exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) thereof as transactions not involving any public
offering.
(ii)
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------
<S> <C> <C>
1.1 -- Form of Underwriting Agreement.
2.1+ -- Form of Asset Contribution Agreement between Pentegra Dental Group, Inc. and a sole
proprietorship
2.2+ -- Form of Asset Contribution Agreement between Pentegra Dental Group, Inc. and a partnership
2.3+ -- Form of Asset Contribution Agreement between Pentegra Dental Group, Inc. and an entity
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------
<S> <C> <C>
2.4+ -- Form of Agreement and Plan of Reorganization between Pentegra Dental Group, Inc. and an entity
2.5+ -- Exchange Agreement dated as of July 31, 1997 among Pentegra Investments, Inc., Pentegra Dental
Group, Inc. and the stockholders named therein
2.6+ -- Asset Contribution Agreement dated as of August 20, 1997 among Pentegra Dental Group, Inc.,
Pentegra, Ltd., Napili International and Omer K. Reed, D.D.S.
2.7 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and James
P. Allen, D.D.S.
2.8 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Walter J. Anderson, D.D.S, Donald H. Plotkin, D.D.S, William H. Swilley, D.D.S., William
A. Cerny, D.D.S. and Graham A. Satchell, D.D.S., Inc., dba Anderson Dental Group and Walter J.
Anderson, D.D.S., Donald H. Plotkin, D.D.S., William A. Cerny, D.D.S., Brian M. Ellis, D.D.S.
and Afshan Kaviani, D.D.S.
2.9 -- Asset Contribution Agreement dated August 15, 1997 by and among Pentegra Dental Group, Inc.,
Ronnie Andress, D.D.S., Inc., and Ronnie Andress, D.D.S.
2.10 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Victor H. Burdick, D.D.S., P.C., and Victor H. Burdick, D.D.S.
2.11 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Marvin V. Cavallino, D.D.S., A Professional Corporation, and Marvin Cavallino, D.D.S.
2.12 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., James H. Clarke, Jr., D.D.S., Inc. and James H. Clarke, Jr., D.D.S.
2.13 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Henry
Cuttler, D.D.S.
2.14 -- Agreement and Plan of Reorganization dated August 11, 1997 by and among Pentegra Dental Group,
Inc., Edward T. Dougherty, Jr., D.D.S., P.A., and Edward T. Dougherty, Jr., D.D.S.
2.15 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
Family Dental Centers, P.A., Steve Anderson, D.D.S. and Lindi B. Anderson, D.D.S.
2.16 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Richard H. Fettig, D.D.S.
2.17 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc., Alan
H. Gerbholz, D.D.S., P.C. and The AMG Trust.
2.18 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Michael J. Gershtenson, D.D.S., P.C. and Michael J. Gershtenson, D.D.S.
2.19 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Mack E. Greder, D.D.S, P.C. and Mack Greder, D.D.S.
2.20 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Salvatore J. Guarnieri, D.D.S.
2.21 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc., Kent
M. Hamilton, D.D.S, P.C. and Kent M. Hamilton, D.D.S.
2.22 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and David
R. Henderson, D.D.S
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------
<S> <C> <C>
2.23 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Stephen Hwang, D.D.S
2.24 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
Jackson Dental Partnership, Penn Jackson, Sr. and Penn Jackson, Jr.
2.25 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Bruce
A. Kanehl, D.D.S.
2.26 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
Roger Allen Kay, D.D.S, P.A. and Roger A. Kay, D.D.S.
2.27 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Patrick T. Kelly, D.D.S, P.C. and Patrick T. Kelly, D.D.S.
2.28 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Brian K. Kniff, D.D.S, P.C., Brian K. Kniff, D.D.S and Gordon Ledingham, D.D.S.
2.29 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Lakeview Dental, P.C. and Kevin Gasser, D.D.S.
2.30 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Donald
W. Lanning, D.D.S.
2.31 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and David
A. Little, D.D.S.
2.32 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
Susan E. Lunson, D.D.S., P.C. and Susan E. Lunson, D.D.S.
2.33 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
Richard W. Mains, Jr., D.M.D, P.C. and Richard W. Mains, Jr., D.M.D.
2.34 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and James
M. McDonough, D.D.S.
2.35 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
James W. Medlock, D.D.S., P.A. and James Medlock, D.D.S.
2.36 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., James Randy Mellard, D.D.S., M.S., P.C. and James Randy Mellard, D.D.S., M.S.
2.37 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Mary B. Mellard, D.D.S., P.C. and Mary B. Mellard, D.D.S.
2.38 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., T.L. Mullooly, D.D.S., Inc. and T.L. Mullooly, D.D.S.
2.39 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
Byron L. Novosad, D.D.S., Inc. and Byron L. Novosad, D.D.S.
2.40 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
Randy O'Brien, D.D.S., Inc. and Randy O'Brien, D.D.S.
2.41 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Terrence C. O'Keefe, D.D.S.
2.42 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Harold A. Pebbles, D.D.S., P.C. and Harold Pebbles, D.D.S.
2.43 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Jimmy
F. Pinner, D.D.S.
2.44 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Omer K. Reed, D.D.S., Ltd. and Omer K. Reed, D.D.S.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------
<S> <C> <C>
2.45 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Richard Reinitz, D.D.S., P.C. and Richard Reinitz, D.D.S.
2.46 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Greg
Richards, D.D.S.
2.47 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Richard N. Smith, DMD, P.C. and The Paradise Trust
2.48 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and John
N. Stellpflug, D.D.S.
2.49 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Jack
Stephens, D.D.S.
2.50 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Y. Paul Suzuki, D.D.S., P.S. and Paul Suzuki, D.D.S.
2.51 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Donald
F. Tamborello, D.D.S.
2.52 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Helena
Thomas, D.D.S.
2.53 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Louis J. Thornley, D.D.S., P.S. and Louis J. Thornley, D.D.S.
2.54 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and S.
Victor Uhrenholdt, D.D.S.
2.55 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Scott
Van Zandt, D.D.S.
2.56 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Ronald M. Yaros, D.D.S., P.C. and Ron Yaros, D.D.S.
The schedules and exhibits to the foregoing acquisition agreements have not been filed as
exhibits to this Registration Statement. Pursuant to Item 601(b)(2) of Regulation S-K, Pentegra
Dental Group, Inc. agrees to furnish a copy of such schedules and exhibits to the Commission
upon request.
3.1+ -- Restated Certificate of Incorporation of Pentegra Dental Group, Inc.
3.2+ -- Bylaws of Pentegra Dental Group, Inc.
4.1 -- Form of certificate evidencing ownership of Common Stock of Pentegra Dental Group, Inc.
4.2+ -- Form of Registration Rights Agreement for Owners of Founding Affiliated Practices
4.3+ -- Registration Rights Agreement dated September 30, 1997 between Pentegra Dental Group, Inc. and
the stockholders named therein
5.1 -- Opinion of Jackson Walker L.L.P.
10.1+ -- Pentegra Dental Group, Inc. 1997 Stock Compensation Plan
10.2+ -- Employment Agreement dated July 31, 1997 between Pentegra Dental Group, Inc. and Omer K. Reed,
D.D.S.
10.3+ -- Employment Agreement dated July 1, 1997 between Pentegra Dental Group, Inc. and Gary S. Glatter
10.4+ -- Employment Agreement dated July 12, 1997 between Pentegra Dental Group, Inc. and John Thayer
10.5+ -- Employment Agreement dated September 1, 1997 between Pentegra Dental Group, Inc. and Sam H. Carr
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------
<S> <C> <C>
10.6+ -- Employment Agreement dated July 12, 1997 between Pentegra Dental Group, Inc. and James Dunn, Jr.
10.7+ -- Employment Agreement dated July 12, 1997 between Pentegra Dental Group, Inc. and Kimberlee K.
Rozman
10.8+ -- Form of Service Agreement
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2 -- Consent of Jackson Walker L.L.P. (contained in Exhibit 5.1)
23.3+ -- Consents of Director Nominees.
24.1+ -- Power of Attorney (contained on the signature page of this Registration Statement).
27.1 -- Financial Data Schedule.
</TABLE>
- ---------
+ Previously filed.
(b) Financial Statement Schedules.
All schedules are omitted because they are not applicable or because the
required information is contained in the Financial Statements or Notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes as follows:
(1) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to each
purchaser.
(2) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described in Item 14,
or otherwise, the registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payments by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
(3) That, for the purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(4) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Pentegra Dental Group, Inc. has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Houston, State of Texas, on December 10, 1997.
<TABLE>
<S> <C> <C>
PENTEGRA DENTAL GROUP, INC.
By: /s/ GARY S. GLATTER
-----------------------------------------
Gary S. Glatter
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated on December 10, 1997.
SIGNATURES TITLE
- ------------------------------ ----------------------------------------------
/s/ GARY S. GLATTER
- ------------------------------ President, Chief Executive Officer and
Gary S. Glatter Director (Principal Executive Officer)
/s/ SAM H. CARR Senior Vice President and Chief Financial
- ------------------------------ Officer (Principal Financial and Accounting
Sam H. Carr Officer)
/s/ OMER K. REED, D.D.S.*
- ------------------------------ Chairman of the Board
Omer K. Reed, D.D.S.
/s/ J. MICHAEL CASAS*
- ------------------------------ Director
J. Michael Casas
/s/ ALLEN M. GELWICK*
- ------------------------------ Director
Allen M. Gelwick
/s/ GEORGE M. SIEGEL*
- ------------------------------ Director
George M. Siegel
/s/ JAMES L. DUNN, JR.*
- ------------------------------ Director
James L. Dunn, Jr.
*By /s/ KIMBERLEE K.
ROZMAN
- ------------------------------
Kimberlee K. Rozman, as
ATTORNEY-IN-FACT
II-9
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ---------- ------------------------------------------------------------------------------------------- ---------------
<C> <C> <S> <C>
1.1 -- Form of Underwriting Agreement.
2.1+ -- Form of Asset Contribution Agreement between Pentegra Dental Group, Inc. and a sole
proprietorship
2.2+ -- Form of Asset Contribution Agreement between Pentegra Dental Group, Inc. and a partnership
2.3+ -- Form of Asset Contribution Agreement between Pentegra Dental Group, Inc. and an entity
2.4+ -- Form of Agreement and Plan of Reorganization between Pentegra Dental Group, Inc. and an
entity
2.5+ -- Exchange Agreement dated July 31, 1997 among Pentegra Investments, Inc., Pentegra Dental
Group, Inc. and the stockholders named therein
2.6+ -- Asset Contribution Agreement dated as of August 20, 1997 among Pentegra Dental Group, Inc.,
Pentegra, Ltd., Napili International and Omer K. Reed, D.D.S.
2.7 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
James P. Allen, D.D.S.
2.8 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Walter J. Anderson, D.D.S, Donald H. Plotkin, D.D.S, William H. Swilley,
D.D.S., William A. Cerny, D.D.S. and Graham A. Satchell, D.D.S., Inc., dba Anderson
Dental Group and Walter J. Anderson, D.D.S., Donald H. Plotkin, D.D.S., William A. Cerny,
D.D.S., Brian M. Ellis, D.D.S. and Afshan Kaviani, D.D.S.
2.9 -- Asset Contribution Agreement dated August 15, 1997 by and among Pentegra Dental Group,
Inc., Ronnie Andress, D.D.S., Inc., and Ronnie Andress, D.D.S.
2.10 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Victor H. Burdick, D.D.S., P.C., and Victor H. Burdick, D.D.S.
2.11 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Marvin V. Cavallino, D.D.S., A Professional Corporation, and Marvin
Cavallino, D.D.S.
2.12 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., James H. Clarke, Jr., D.D.S., Inc. and James H. Clarke, Jr., D.D.S.
2.13 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Henry Cuttler, D.D.S.
2.14 -- Agreement and Plan of Reorganization dated August 11, 1997 by and among Pentegra Dental
Group, Inc., Edward T. Dougherty, Jr., D.D.S., P.A., and Edward T. Dougherty, Jr., D.D.S.
2.15 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Family Dental Centers, P.A., Steve Anderson, D.D.S. and Lindi B. Anderson, D.D.S.
2.16 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Richard H. Fettig, D.D.S.
2.17 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Alan H. Gerbholz, D.D.S., P.C. and The AMG Trust.
2.18 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Michael J. Gershtenson, D.D.S., P.C. and Michael J. Gershtenson, D.D.S.
2.19 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Mack E. Greder, D.D.S, P.C. and Mack Greder, D.D.S.
</TABLE>
<PAGE>
<TABLE>
<C> <C> <S> <C>
2.20 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Salvatore J. Guarnieri, D.D.S.
2.21 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Kent M. Hamilton, D.D.S, P.C. and Kent M. Hamilton, D.D.S.
2.22 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
David R. Henderson, D.D.S
2.23 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Stephen Hwang, D.D.S
2.24 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Jackson Dental Partnership, Penn Jackson, Sr. and Penn Jackson, Jr.
2.25 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Bruce A. Kanehl, D.D.S.
2.26 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Roger Allen Kay, D.D.S, P.A. and Roger A. Kay, D.D.S.
2.27 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Patrick T. Kelly, D.D.S, P.C. and Patrick T. Kelly, D.D.S.
2.28 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Brian K. Kniff, D.D.S, P.C., Brian K. Kniff, D.D.S and Gordon Ledingham,
D.D.S.
2.29 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Lakeview Dental, P.C. and Kevin Gasser, D.D.S.
2.30 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Donald W. Lanning, D.D.S.
2.31 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
David A. Little, D.D.S.
2.32 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Susan E. Lunson, D.D.S., P.C. and Susan E. Lunson, D.D.S.
2.33 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Richard W. Mains, Jr., D.M.D, P.C. and Richard W. Mains, Jr., D.M.D.
2.34 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
James M. McDonough, D.D.S.
2.35 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group,
Inc., James W. Medlock, D.D.S., P.A. and James Medlock, D.D.S.
2.36 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., James Randy Mellard, D.D.S., M.S., P.C. and James Randy Mellard, D.D.S.,
M.S.
2.37 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Mary B. Mellard, D.D.S., P.C. and Mary B. Mellard, D.D.S.
2.38 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., T.L. Mullooly, D.D.S., Inc. and T.L. Mullooly, D.D.S.
2.39 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Byron L. Novosad, D.D.S., Inc. and Byron L. Novosad, D.D.S.
2.40 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Randy O'Brien, D.D.S., Inc. and Randy O'Brien, D.D.S.
2.41 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Terrence C. O'Keefe, D.D.S.
</TABLE>
<PAGE>
<TABLE>
<C> <C> <S> <C>
2.42 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Harold A. Pebbles, D.D.S., P.C. and Harold Pebbles, D.D.S.
2.43 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Jimmy F. Pinner, D.D.S.
2.44 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Omer K. Reed, D.D.S., Ltd. and Omer K. Reed, D.D.S.
2.45 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Richard Reinitz, D.D.S., P.C. and Richard Reinitz, D.D.S.
2.46 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Greg Richards, D.D.S.
2.47 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Richard N. Smith, DMD, P.C. and The Paradise Trust
2.48 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
John N. Stellpflug, D.D.S.
2.49 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Jack Stephens, D.D.S.
2.50 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Y. Paul Suzuki, D.D.S., P.S. and Paul Suzuki, D.D.S.
2.51 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Donald F. Tamborello, D.D.S.
2.52 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Helena Thomas, D.D.S.
2.53 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Louis J. Thornley, D.D.S., P.S. and Louis J. Thornley, D.D.S.
2.54 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
S. Victor Uhrenholdt, D.D.S.
2.55 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Scott Van Zandt, D.D.S.
2.56 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Ronald M. Yaros, D.D.S., P.C. and Ron Yaros, D.D.S.
The schedules and exhibits to the foregoing acquisition agreements have not been filed as
exhibits to this Registration Statement. Pursuant to Item 601(b)(2) of Regulation S-K,
Pentegra Dental Group, Inc. agrees to furnish a copy of such schedules and exhibits to
the Commission upon request.
3.1+ -- Restated Certificate of Incorporation of Pentegra Dental Group, Inc.
3.2+ -- Bylaws of Pentegra Dental Group, Inc.
4.1 -- Form of certificate evidencing ownership of Common Stock of Pentegra Dental Group, Inc.
4.2+ -- Form of Registration Rights Agreement for Owners of Founding Affiliated Practices
4.3+ -- Registration Rights Agreement dated September 30, 1997 between Pentegra Dental Group, Inc.
and the stockholders named therein
5.1 -- Opinion of Jackson Walker L.L.P.
10.1+ -- Pentegra Dental Group, Inc. 1997 Stock Compensation Plan
10.2+ -- Employment Agreement dated July 31, 1997 between Pentegra Dental Group, Inc. and Omer K.
Reed, D.D.S.
</TABLE>
<PAGE>
<TABLE>
<C> <C> <S> <C>
10.3+ -- Employment Agreement dated July 1, 1997 between Pentegra Dental Group, Inc. and Gary S.
Glatter
10.4+ -- Employment Agreement dated July 12, 1997 between Pentegra Dental Group, Inc. and John
Thayer
10.5+ -- Employment Agreement dated September 1, 1997 between Pentegra Dental Group, Inc. and Sam H.
Carr
10.6+ -- Employment Agreement dated July 12, 1997 between Pentegra Dental Group, Inc. and James
Dunn, Jr.
10.7+ -- Employment Agreement dated July 12, 1997 between Pentegra Dental Group, Inc. and Kimberlee
K. Rozman
10.8+ -- Form of Service Agreement
23.1 -- Consent of Coopers & Lybrand, L.L.P.
23.2 -- Consent of Jackson Walker L.L.P. (contained in Exhibit 5.1)
23.3+ -- Consents of Director Nominees.
24.1+ -- Power of Attorney (contained on the signature page of this Registration Statement).
27.1 -- Financial Data Schedule.
</TABLE>
- ---------
+ Previously filed.
<PAGE>
DRAFT: NOVEMBER 13, 1997
2,500,000 SHARES
PENTEGRA DENTAL GROUP, INC.
COMMON STOCK
FORM OF UNDERWRITING AGREEMENT
------------------------------
________ ___, 1997
LEHMAN BROTHERS INC.
RAUSCHER PIERCE REFSNES, INC.
As Representatives of the several
Underwriters named in Schedule I,
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Dear Sirs:
Pentegra Dental Group, Inc., a Delaware corporation (the "Company"),
proposes to sell 2,500,000 shares (the "Firm Stock") of the Company's common
stock, par value $.001 per share ("Common Stock"). In addition, the Company
proposes to grant to the Underwriters named in Schedule I hereto (the
"Underwriters") an option to purchase up to an additional 375,000 shares of the
Common Stock on the terms and for the purposes set forth in Section 2 (the
"Option Stock"). The Firm Stock and the Option Stock, if purchased, are
hereinafter collectively called the "Stock." This is to confirm the agreement
concerning the purchase of the Stock from the Company by the Underwriters.
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company represents, warrants and agrees that:
(a) A registration statement on Form S-1 with respect to the Stock
has (i) been prepared by the Company in conformity with the requirements of
the United States Securities Act of 1933, as amended (the "Securities
Act"), and the rules and regulations (the "Rule and Regulations") of the
United States Securities and Exchange Commission (the "Commission")
thereunder, (ii) been filed with the Commission under the Securities Act
and (iii) become effective under the Securities Act. Copies of such
registration statement have been delivered by the Company to you as the
representatives (the "Representatives") of the Underwriters. As used in
this Agreement, "Effective Time" means the date and the time as of which
such registration statement, or the most recent post-effective amendment
thereto, if any, was declared effective by the Commission; "Effective Date"
means the date of the Effective Time; "Preliminary Prospectus" means each
prospectus included in such registration statement, or
1
<PAGE>
amendments thereof, before it became effective under the Securities Act
and any prospectus filed with the Commission by the Company with the
prior written consent of the Representatives pursuant to Rule 424(a) of
the Rules and Regulations; "Registration Statement" means such
registration statement, as amended at the Effective Time, including all
information contained in the final prospectus filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations in accordance with
Section 5(a) hereof and deemed to be a part of the registration
statement as of the Effective Time pursuant to paragraph (b) of Rule
430A of the Rules and Regulations; and "Prospectus" means such final
prospectus, as first filed with the Commission pursuant to paragraph (1)
or (4) of Rule 424(b) of the Rules and Regulations. The Commission has
not issued any order preventing or suspending the use of any Preliminary
Prospectus.
(b) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform in all material respects to the
requirements of the Securities Act and the Rules and Regulations and do not
and will not, as of the applicable effective date (as to the Registration
Statement and any amendment thereto) and as of the applicable filing date
(as to the Prospectus and any amendment or supplement thereto) contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading; PROVIDED that no representation or warranty is made as to
information contained in or omitted from the Registration Statement or the
Prospectus in reliance upon and in conformity with written information
furnished to the Company through the Representatives by or on behalf of any
Underwriter specifically for inclusion therein (which written information
is specifically identified in Section 8(e)).
(c) After giving effect to the share exchange (the "Share Exchange")
among the Company and the holders of the outstanding shares of common stock
of Pentegra Investments, Inc., a Delaware corporation ("PII"), to be
completed on the First Delivery Date (as hereinafter defined) pursuant to
the terms of the Exchange Agreement dated as of July 31, 1997 among the
Company, PII and the holders of common stock of PII (the "Share Exchange
Agreement") (a copy of which has been filed as an exhibit to the
Registration Statement), PII will be the only subsidiary (as defined in
Section 15) of the Company as of the First Delivery Date, and the Company
has never had any other subsidiary.
(d) The Company, PII and each of the entities that, on or prior to
the First Delivery Date, will have entered into an Acquisition Agreement
(as hereinafter defined) and/or a management service agreement or similar
contract (each, a "Service Agreement") with the Company (collectively, the
"PA Affiliates"), other than those PA Affiliates that are sole
proprietorships, have been duly organized and are validly existing in good
standing (to the extent applicable) under the laws of their respective
jurisdictions of organization, are duly registered and qualified to
transact business and are in good standing as foreign corporations,
professional corporations, professional associations, limited liability
companies or limited partnerships, as the case may
2
<PAGE>
be, in each jurisdiction in which their respective ownership or lease of
property or the conduct of their respective businesses requires such
qualification, and have all power and authority necessary to own, lease,
operate or hold their respective properties and to conduct the
businesses in which they are engaged. The PA Affiliates are listed on
Schedule II hereto, and the information contained in such Schedule is
true and correct.
(e) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the shares of capital stock of the Company that will
be issued and outstanding as of the First Delivery Date (before giving
effect to the issuance and sale of the shares of Stock hereunder) have been
duly and validly authorized and, when issued and delivered pursuant to the
Share Exchange Agreement and the Acquisition Agreements (as hereinafter
defined) on the First Delivery Date, will be duly and validly issued, fully
paid and nonassessable, will not have been issued in violation of any
preemptive or similar rights and conform to the description thereof
contained in the Prospectus; and all of the issued shares of capital stock
of PII have been duly and validly authorized and issued and are fully paid
and nonassessable, have not been issued in violation of any preemptive or
similar rights and, as of the First Delivery Date, will be owned directly
by the Company, free and clear of all liens, encumbrances, equities or
claims.
(f) The shares of the Stock to be issued and sold by the Company to
the Underwriters hereunder have been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will be
duly and validly issued, fully paid and nonassessable and will not have
been issued in violation of or be subject to any preemptive or similar
rights; and the Stock will conform to the description thereof contained in
the Prospectus.
(g) The Company has the power and authority to enter into this
Agreement and to issue, sell and deliver the Stock to the Underwriters as
provided herein. This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding agreement of
the Company enforceable against the Company in accordance with its terms,
subject to the effect of (i) any applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting
creditors' rights generally and (ii) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(h) The Company has the power and authority to enter into each of the
acquisition transactions to be consummated on the First Delivery Date, as
described in the Registration Statement and the Prospectus (collectively,
the "Acquisitions"), each of the agreements pursuant to which an
Acquisition is being consummated (collectively, the "Acquisition
Agreements" and, together with the Service Agreements, the "Transaction
Agreements") and each of the Service Agreements to which it is (or, as of
the First Delivery Date, will be) a party. Each PA Affiliate has the power
and authority to enter into each Transaction Agreement to which it is (or,
as of the First Delivery Date, will be) a party. The execution and
delivery of, and the performance by the Company and the PA Affiliates of
their respective obligations under, the Transaction Agreements to which
they are parties, respectively, have been duly and validly authorized by
3
<PAGE>
the Company and the PA Affiliates and each Transaction Agreement has been
(or, in the case of any such Transaction Agreement to be entered into
between the date of this Agreement and the time of the deliveries to be
made under this Agreement on the First Delivery Date, will, as of the First
Delivery Date, be) duly executed and delivered by the Company and each PA
Affiliate that is a party to such agreement, and constitutes (or, in the
case of any such Transaction Agreement to be entered into between the date
of this Agreement and the time of the deliveries to be made under this
Agreement on the First Delivery Date, will, as of the First Delivery Date,
constitute) the legal, valid and binding agreement of the Company and each
such PA Affiliate, enforceable in accordance with its terms, except as that
enforceability may be subject to the effect of (i) any applicable
bankruptcy, insolvency, reorganization, moratorium or other laws relating
to or affecting creditors' rights generally and (ii) general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(i) The execution, delivery and performance of this Agreement and
each of the Transaction Agreements by the Company and the consummation of
the transactions contemplated hereby and thereby will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company, PII or any
of the PA Affiliates is a party or by which the Company, PII or any of the
PA Affiliates is bound or to which any of the property or assets of the
Company, PII or any of the PA Affiliates is subject, nor will such actions
result in any violation of the provisions of the charter, by-laws or other
organizational documents of the Company, PII or any of the PA Affiliates or
any statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company, PII or any of the PA
Affiliates or any of their respective properties or assets; except for the
registration of the Stock under the Securities Act and such consents,
approvals, authorizations, registrations or qualifications as may be
required under the United States Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and applicable state securities laws in
connection with the purchase and distribution of the Stock by the
Underwriters, no consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body is
required for the execution, delivery and performance of this Agreement by
the Company or the consummation of the transactions contemplated hereby;
and no consent, approval, authorization or order of, or filing or
registration with, any court or governmental agency or body is required for
the execution, delivery and performance of any of the Transaction
Agreements or the consummation of the transactions contemplated thereby.
(j) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to (i) require the
Company to file a registration statement under the Securities Act with
respect to any securities of the Company owned or to be owned by such
person, (ii) require the Company to include such securities in the
securities registered pursuant to the Registration Statement or
(iii) except as described in the Prospectus, require that
4
<PAGE>
any securities be registered pursuant to any other registration
statement filed by the Company under the Securities Act.
(k) Except as described in the Registration Statement, the Company
has not sold or issued any shares of Common Stock during the six-month
period preceding the date of the Prospectus, including any sales pursuant
to Rule 144A under, or Regulations D or S of, the Securities Act.
(l) None of the Company, PII or any of the PA Affiliates has
sustained, since the date of the latest audited financial statements
included in the Prospectus, any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in the
Prospectus; and, since such date, (i) there has not been any material
change in the capital stock or long-term or short-term debt of the Company,
PII or any of the PA Affiliates or any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the general affairs, management, consolidated financial position,
stockholders' equity, results of operations or prospects of the Company,
otherwise than as set forth or contemplated in the Prospectus and (ii)
except as may otherwise be disclosed in the Prospectus, the Company has not
(A) issued or granted any securities, (B) incurred any liability or
obligation, direct, indirect or contingent, other than liabilities and
obligations that were incurred in the ordinary course of business, (C)
entered into any transaction not in the ordinary course of business or (D)
declared or paid any dividend on its capital stock.
(m) The financial statements (including the related notes and any
supporting schedules) filed as part of the Registration Statement or
included in the Prospectus present fairly the financial condition and
results of operations of the entities purported to be shown thereby, at the
dates and for the periods indicated, and have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved; the pro forma balance sheet of the
Company, together with the related notes, as set forth in the Registration
Statement and the Prospectus, present fairly the information shown therein,
have been prepared in accordance with the applicable provisions of Article
11 of Regulation S-X promulgated by the Commission with respect to pro
forma financial statements and have been properly compiled on the pro forma
basis described therein and, in the opinion of the Company, the assumptions
used in the preparation thereof are reasonable and the adjustments used
therein are appropriate to give effect to the transactions or circumstances
referred to therein; and the other financial and statistical information
and data set forth in the Registration Statement and the Prospectus (and
any amendment or supplement thereto) is, in all material respects,
accurately presented and has been prepared on a basis consistent with such
financial statements and the books and records of the Company.
(n) Coopers & Lybrand LLP, who have certified certain financial
statements of the Company, whose report appears in the Prospectus and who
have delivered the initial letter
5
<PAGE>
referred to in Section 7(i) hereof, are independent public accountants
as required by the Securities Act and the Rules and Regulations.
(o) None of the Company, PII or the PA Affiliates (i) is in violation
of its charter, by-laws or other organizational documents, if any, (ii) is
in default in any material respect, and no event has occurred which, with
notice or lapse of time or both, would constitute such a default, in the
due performance or observance of any term, covenant or condition contained
in any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which it is a party or by which it is bound or
to which any of its properties or assets is subject or (iii) is in
violation in any material respect of any law, ordinance, governmental rule,
regulation or court decree to which it or its property or assets may be
subject or has failed to obtain any material license, permit, certificate,
franchise or other governmental authorization or permit necessary to the
ownership of its property or to the conduct of its business.
(p) Neither the Company, PII nor any of the PA Affiliates has
violated any foreign, federal, state or local law or regulation relating to
the protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants (collectively,
"Environmental Laws"), or any foreign, federal or state law relating to the
practice of dentistry or governing the provision of dental services or the
collection and/or application of fees therefrom (collectively, "Applicable
Healthcare Laws"), or any foreign, federal or state law relating to
discrimination in the hiring, promotion or pay of employees or any
applicable foreign, federal or state wages and hours laws, or any
provisions of the United States Employee Retirement Income Security Act of
1976, as amended (together with the rules and regulations thereunder,
"ERISA"), or the rules and regulations promulgated thereunder, which,
singly or in the aggregate, might have a material adverse effect on the
consolidated financial position, stockholders' equity, results of
operations, business or prospects of the Company and PII, taken as a whole
("Material Adverse Effect").
(q) Each of the Company, PII and the PA Affiliates has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("permits"), including, without limitation, under any
applicable Environmental Laws and Applicable Healthcare Laws and related
governmental regulations, as are necessary to own its respective properties
and to conduct its business in the manner described in the Prospectus,
subject in each case to such qualifications as may be set forth in the
Prospectus and except where the failure to have such permits would not,
singly or in the aggregate, have a Material Adverse Effect; each of the
Company, PII and the PA Affiliates has fulfilled and performed all of its
obligations with respect to such permits and no event has occurred which
allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other material impairment of the
rights of the holder of any such permits, subject in each case to such
qualifications as may be set forth in the Prospectus and except where the
failure so to fulfill or perform or the occurrence of such an event would
not, singly or in the aggregate, have a Material Adverse Effect; and,
except as described in the Prospectus, none of such permits contains any
restriction that is materially burdensome to the Company, PII or the PA
Affiliates. Each of the (i) dentists
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and (ii) other professionals involved in providing dental care to
patients (each, a "Dental Professional") who is employed by or
affiliated with a PA Affiliate has such permits under Applicable
Healthcare Laws and related governmental regulations (including, as
applicable, state and local licenses to practice dentistry and federal
Drug Enforcement Agency Controlled Substances Registration certificates)
as are necessary to provide dental care in such jurisdictions as are
contemplated by the Service Agreement to be entered into between that PA
Affiliate and the Company on the First Delivery Date; each of such
Dental Professionals has fulfilled and performed all of his or her
material obligations with respect to such permits and no event has
occurred which allows, or after notice or lapse of time (or both) would
allow, revocation or termination thereof or would result in any other
material impairment of the rights of the holder of such permit; and,
except as described in the Prospectus, no such permit contains any
restrictions that are materially burdensome to the holder thereof or the
PA Affiliate with which that holder is affiliated or employed. The
Company's and each PA Affiliate's business practices do not violate any
foreign, federal or state laws regarding dentist ownership of (or
financial relationship with), and referral to, entities providing
dental-related goods or services, or laws respecting financial interests
held by dentists in entities to which they may refer patients for the
provision of dental-related goods or services. None of the PA
Affiliates (or any of their respective predecessors) has billed or
accepted payment from any Medicare, Medicaid or CHAMPUS program during
the two years preceding the date of this Agreement in an aggregate
amount that was material to their respective total billings or payments
for either of those years.
(r) The Company, PII and each of the PA Affiliates have good and
marketable title in fee simple to all real property that has been or,
pursuant to the Acquisition Agreements, is to be acquired by the Company on
or before the First Closing Date and good and marketable title to all
personal property owned by them that has been or, pursuant to the
Acquisition Agreements, is to be acquired by the Company on or before the
First Closing Date, in each case free and clear of all liens, encumbrances
and defects, except such as are described in the Prospectus or such as do
not materially adversely affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company, PII and the PA Affiliates; and all real property and buildings
held under lease by the Company, PII and the PA Affiliates are held by them
under valid, subsisting and enforceable leases, with such exceptions as are
not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company, PII and the PA Affiliates.
Each PA Affiliate has obtained all consents of third parties necessary
under each lease (whether relating to real property or personal property)
to which it is a party for the consummation of the transactions
contemplated by the Transaction Agreements to which it is (or, as of the
First Delivery Date, will be) a party.
(s) The Company, PII and each of the PA Affiliates carry, or
otherwise are covered by, insurance in such amounts and covering such risks
(including, without limitation, malpractice risks) as is adequate for the
conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in similar businesses;
and
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none of the Company, PII or any of the PA Affiliates has received any
notice of cancellation or nonrenewal with respect to such insurance.
(t) Each of the Company, PII and the PA Affiliates owns or possesses
adequate rights to use all material patents, patent applications,
trademarks, service marks, trade names, trademark registrations, service
mark registrations, copyrights and licenses used in the conduct of its
business and the Company has no reason to believe that the conduct of their
respective businesses will conflict with, and has not received any notice
of any claim of conflict with, any such rights of others.
(u) There are no legal or governmental proceedings (domestic or
foreign) pending to which the Company, PII or any of the PA Affiliates is a
party or of which any property or assets of the Company, PII or any of the
PA Affiliates is the subject which, singly or in the aggregate, if
determined adversely to the Company, PII or any of the PA Affiliates, might
have a Material Adverse Effect; and, to the best of the Company's
knowledge, no such proceedings are threatened or contemplated by any
governmental authorities or threatened by others.
(v) There are no contracts or other documents that are required to be
described in the Prospectus or filed as exhibits to the Registration
Statement by the Securities Act or by the Rules and Regulations which have
not been described in the Prospectus or filed as exhibits to the
Registration Statement as required.
(w) No relationship, direct or indirect, exists between or among the
Company, on the one hand, and the directors, officers, stockholders,
customers or suppliers of the Company, on the other hand, that is required
to be described in the Prospectus and that is not so described.
(x) No labor disturbance by the employees of the Company, PII or any
of the PA Affiliates exists or, to the knowledge of the Company, is
imminent which might be expected to, singly or in the aggregate, have a
Material Adverse Effect; none of the Company, PII or any of the PA
Affiliates has ever been party to a collective bargaining agreement; and
there are no significant unfair labor practice complaints pending against
the Company, PII or any of the PA Affiliates or, to the best of the
Company's knowledge, threatened against any of them. The Company is in
compliance in all material respects with all presently applicable
provisions of ERISA; no "reportable event" (as defined in ERISA) has
occurred with respect to any "pension plan" (as defined in ERISA) for which
the Company would have any liability; the Company has not incurred and does
not expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412
or 4971 of the United States Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder (the
"Code"); and each "pension plan" for which the Company would have any
liability that is intended to be qualified under Section 401(a) of the Code
is so qualified in all material respects and nothing has occurred, whether
by action or by failure to act, which would cause the loss of such
qualification.
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(y) The Company and each of the PA Affiliates (i) have filed all
federal, state, local and foreign income and franchise tax returns required
to be filed through the date hereof and (ii) have paid all taxes due
thereon. No tax deficiency has been determined adversely to the Company,
PII or any of the PA Affiliates which has resulted in (nor does the Company
have any knowledge of any tax deficiency which, if determined adversely to
the Company, PII or any of the PA Affiliates, might result in), singly or
in the aggregate, a Material Adverse Effect.
(z) None of the Company, PII or the PA Affiliates, nor any director,
officer, agent, employee or other person associated with or acting on
behalf of the Company, PII or the PA Affiliates, has used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expense relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or employee
from corporate funds; violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment.
(aa) The Company (i) makes and keeps accurate books and records and
(ii) maintains internal accounting controls which provide reasonable
assurance that (A) transactions are executed in accordance with
management's authorization, (B) transactions are recorded as necessary to
permit preparation of its financial statements and to maintain
accountability for its assets, (C) access to its assets is permitted only
in accordance with management's authorization and (D) the reported
accountability for its assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
difference.
(bb) There has been no storage, disposal, generation, manufacture,
refinement, transportation, handling or treatment of toxic wastes, medical
wastes, hazardous wastes or hazardous substances by the Company or PII (or,
to the knowledge of the Company, any of their predecessors in interest) at,
upon or from any of the property now or previously owned, leased or
operated by the Company or PII in violation of any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit or which
could require remedial action under any applicable law, ordinance, rule,
regulation, order, judgment, decree or permit, except for any violation or
remedial action which would not have, or could not reasonably be expected
to have, singularly or in the aggregate with all such violations and
remedial actions, a Material Adverse Effect; there has been no material
spill, discharge, leak, emission, injection, escape, dumping or release of
any kind onto such property or into the environment surrounding such
property of any toxic wastes, medical wastes, solid wastes, hazardous
wastes or hazardous substances due to or caused by the Company or PII or
with respect to which the Company or PII have knowledge, except for any
such spill, discharge, leak, emission, injection, escape, dumping or
release which would not have or would not be reasonably likely to have,
singularly or in the aggregate with all such spills, discharges, leaks,
emissions, injections, escapes, dumpings and releases, a Material Adverse
Effect; and the terms "hazardous wastes," "toxic wastes," "hazardous
substances" and "medical wastes" shall have the meanings specified in any
applicable local, state, federal and foreign laws or regulations with
respect to environmental protection.
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(cc) In connection with the offering of the Stock contemplated hereby,
the Company has conducted a review of the effect of Environmental Laws on
the business, operations and properties of the Company, PII and the PA
Affiliates in the course of which it has identified and evaluated
associated costs and liabilities (including, without limitation, any
capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws or any permit, license or
approval, any related constraints on operating activities and any potential
liabilities to third parties). On the basis of such review, the Company
has concluded that such associated costs and liabilities would not, singly
or in the aggregate, result in a Material Adverse Effect or any development
involving a prospective Material Adverse Effect.
(dd) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of shares of the Common Stock to
facilitate the sale or resale of the Stock.
(ee) Neither the Company nor PII is, and upon consummation of the
transactions contemplated hereby neither will be, an "investment company"
within the meaning of such term under the Investment Company Act of 1940,
as amended, and the rules and regulations of the Commission thereunder.
2. PURCHASE OF THE STOCK BY THE UNDERWRITERS. On the basis of the
representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell 2,500,000 shares of
the Firm Stock to the several Underwriters, and each of the Underwriters,
severally and not jointly, agrees to purchase the number of shares of the Firm
Stock set opposite that Underwriter's name in Schedule I hereto. The respective
purchase obligations of the Underwriters with respect to the Firm Stock shall be
rounded among the Underwriters to avoid fractional shares, as the
Representatives may determine.
In addition, the Company grants to the Underwriters an option to
purchase up to 375,000 shares of Option Stock. Such option is granted solely
for the purpose of covering over-allotments in the sale of Firm Stock and is
exercisable as provided in Section 4 hereof. Shares of Option Stock shall be
purchased severally for the account of the Underwriters in proportion to the
number of shares of Firm Stock set opposite the name of such Underwriters in
Schedule I hereto. The respective purchase obligations of each Underwriter with
respect to the Option Stock shall be adjusted by the Representatives so that no
Underwriter shall be obligated to purchase Option Stock other than in 100-share
amounts. The price of both the Firm Stock and any Option Stock shall be $_____
per share.
The Company shall not be obligated to deliver any of the Stock to be
delivered on the First Delivery Date or the Second Delivery Date (as hereinafter
defined), as the case may be, except upon payment for all the Stock to be
purchased on such Delivery Date (as hereinafter defined) as provided herein.
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3. OFFERING OF STOCK BY THE UNDERWRITERS.
Upon authorization by the Representatives of the release of the Firm
Stock, the several Underwriters propose to offer the Firm Stock for sale upon
the terms and conditions set forth in the Prospectus.
It is understood that 175,000 shares of the Firm Stock will initially
be reserved by the several Underwriters for offer and sale upon the terms and
conditions set forth in the Prospectus and in accordance with the rules and
regulations of the National Association of Securities Dealers, Inc. to employees
and persons having business relationships with the Company who have heretofore
delivered to the Representatives offers or indications of interest to purchase
shares of Firm Stock in form satisfactory to the Representatives, and that any
allocation of such Firm Stock among such persons will be made in accordance with
timely directions received by the Representatives from the Company; PROVIDED
that under no circumstances will the Representatives or any Underwriter be
liable to the Company or to any such person for any action taken or omitted in
good faith in connection with such offering to employees and persons having
business relationships with the Company. It is further understood that any
shares of such Firm Stock which are not purchased by such persons will be
offered by the Underwriters to the public upon the terms and conditions set
forth in the Prospectus.
4. DELIVERY OF AND PAYMENT FOR THE STOCK. Delivery of and payment
for the Firm Stock shall be made at the office of Lehman Brothers Inc., New
York, New York, at 10:00 A.M., New York City time, on the third or fourth
business day (as permitted under Rule 15c6-1 under the Exchange Act) following
the date of this Agreement or at such other date or place as shall be determined
by agreement between the Representatives and the Company. This date and time
are sometimes referred to as the "First Delivery Date." On the First Delivery
Date, the Company shall deliver or cause to be delivered certificates
representing the Firm Stock to the Representatives for the account of each
Underwriter against payment to or upon the order of the Company of the purchase
price by wire transfer of immediately available funds. Time shall be of the
essence, and delivery at the time and place specified pursuant to this Agreement
is a further condition of the obligation of each Underwriter hereunder. Upon
delivery, the Firm Stock shall be registered in such names and in such
denominations as the Representatives shall request in writing not less than two
full business days prior to the First Delivery Date. For the purpose of
expediting the checking and packaging of the certificates for the Firm Stock,
the Company shall make the certificates representing the Firm Stock available
for inspection and packaging by the Representatives in New York, New York, at
least one full business day prior to the First Delivery Date.
At any time on or before the thirtieth day after the date of this
Agreement, the option granted in Section 2 may be exercised by written notice
being given to the Company by the Representatives. Such notice shall set forth
the aggregate number of shares of Option Stock as to which the option is being
exercised, the names in which the shares of Option Stock are to be registered,
the denominations in which the shares of Option Stock are to be issued and the
date and time, as determined by the Representatives, when the shares of Option
Stock are to be delivered; PROVIDED,
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HOWEVER, that this date and time shall not be earlier than the First Delivery
Date nor earlier than the second business day after the date on which the
option shall have been exercised nor later than the fifth business day after
the date on which the option shall have been exercised. The date and time the
shares of Option Stock are delivered are sometimes referred to as the "Second
Delivery Date" and the First Delivery Date and the Second Delivery Date are
sometimes each referred to as a "Delivery Date").
Delivery of and payment for the Option Stock shall be made at the
place specified in the first sentence of the first paragraph of this Section 4
(or at such other place as shall be determined by agreement between the
Representatives and the Company) at 10:00 A.M., New York City time, on the
Second Delivery Date. On the Second Delivery Date, the Company shall deliver or
cause to be delivered the certificates representing the Option Stock to the
Representatives for the account of each Underwriter against payment to or upon
the order of the Company of the purchase price by wire transfer of immediately
available funds. Time shall be of the essence, and delivery at the time and
place specified pursuant to this Agreement is a further condition of the
obligation of each Underwriter hereunder. Upon delivery, the Option Stock shall
be registered in such names and in such denominations as the Representatives
shall request in the aforesaid written notice. For the purpose of expediting
the checking and packaging of the certificates for the Option Stock, the Company
shall make the certificates representing the Option Stock available for
inspection by the Representatives in New York, New York, at least one full
business day prior to the Second Delivery Date.
5. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees:
(a) To prepare the Prospectus in a form approved by the
Representatives and to file such Prospectus pursuant to Rule 424(b) under
the Securities Act not later than Commission's close of business on the
second business day following the execution and delivery of this Agreement
or, if applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Securities Act; to make no further amendment or any supplement to
the Registration Statement or to the Prospectus except as permitted herein;
to advise the Representatives, promptly after it receives notice thereof,
of the time when any amendment to the Registration Statement has been filed
or becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish the Representatives with copies
thereof; to advise the Representatives, promptly after it receives notice
thereof, of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or the
Prospectus, of the suspension of the qualification of the Stock for
offering or sale in any jurisdiction, of the initiation or threatening of
any proceeding for any such purpose, or of any request by the Commission
for the amending or supplementing of the Registration Statement or the
Prospectus or for additional information; and, in the event of the issuance
of any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or suspending any such
qualification, to use promptly its best efforts to obtain its withdrawal;
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<PAGE>
(b) To furnish promptly to each of the Representatives and to counsel
for the Underwriters a signed copy of the Registration Statement as
originally filed with the Commission, and each amendment thereto filed with
the Commission, including all consents and exhibits filed therewith;
(c) To deliver promptly to the Representatives such number of the
following documents as the Representatives shall reasonably request: (i)
conformed copies of the Registration Statement as originally filed with the
Commission and each amendment thereto and, (ii) each Preliminary
Prospectus, the Prospectus and any amended or supplemented Prospectus; and,
if the delivery of a prospectus is required at any time after the Effective
Time in connection with the offering or sale of the Stock or any other
securities relating thereto and if, at such time, any events shall have
occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made when
such Prospectus is delivered, not misleading, or, if for any other reason
it shall be necessary to amend or supplement the Prospectus in order to
comply with the Securities Act or the Exchange Act, to notify the
Representatives and, upon their request, to file such document and to
prepare and furnish without charge to each Underwriter and to any dealer in
securities as many copies as the Representatives may from time to time
reasonably request of an amended or supplemented Prospectus which will
correct such statement or omission or effect such compliance;
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the judgment of the Company or the Representatives,
be required by the Securities Act or requested by the Commission;
(e) Prior to filing with the Commission any amendment to the
Registration Statement or supplement to the Prospectus or any Prospectus
pursuant to Rule 424 of the Rules and Regulations, to furnish a copy
thereof to the Representatives and counsel for the Underwriters and obtain
the consent of the Representatives to the filing;
(f) As soon as practicable after the Effective Date, to make
generally available to the Company's security holders and to deliver to the
Representatives an earnings statement of the Company and PII (which need
not be audited) complying with Section 11(a) of the Securities Act and the
Rules and Regulations (including, at the option of the Company, Rule 158);
(g) For a period of five years following the Effective Date, to
furnish to the Representatives copies of all materials furnished by the
Company to its shareholders and all public reports and all reports and
financial statements furnished by the Company to the Nasdaq National Market
or any other quotation system or national securities exchange upon which
the Common Stock may be included or listed pursuant to requirements of or
agreements with such
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<PAGE>
quotation system or exchange or to the Commission pursuant to the
Exchange Act or any rule or regulation of the Commission thereunder;
(h) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Stock for offering
and sale under the securities laws of such jurisdictions as the
Representatives may request and to comply with such laws so as to permit
the continuance of sales and dealings therein in such jurisdictions for as
long as may be necessary to complete the distribution of the Stock;
(i) For a period of 180 days from the date of the Prospectus (the
"180-Day Lockup Period"), not to, directly or indirectly, (1) offer for
sale, sell, pledge, issue, distribute or otherwise dispose of (or enter
into any transaction or device which is designed to, or could be expected
to, result in the disposition by any person at any time in the future of)
any shares of Common Stock or any securities convertible into or
exchangeable for shares of Common Stock, or sell or grant options, rights
or warrants with respect to any shares of Common Stock or any securities
convertible into or exchangeable for shares of Common Stock, or (2) enter
into any swap or other derivatives transaction that transfers to another,
in whole or in part, any of the economic benefits or risks of ownership of
such shares of Common Stock, whether any such transaction described in
clause (1) or (2) above is to be settled by delivery of Common Stock or
other securities, in cash or otherwise, in each case without the prior
written consent of Lehman Brothers Inc., except for (i) the issuance of the
Stock hereunder, (ii) the issuances of shares of Common Stock in connection
with the Share Exchange and the Acquisitions, as described in the
Prospectus, (iii) the grant of options or other awards pursuant to the
Company's 1997 Stock Compensation Plan, as in effect on the date hereof,
and (iv) the issuance of up to 1,500,000 shares of Common Stock in
connection with future acquisitions, PROVIDED that each recipient of shares
of Common Stock referred to in clause (iii) or (iv) agrees with the Company
not to offer for sale, sell or otherwise dispose of (or enter into any
transaction or device which is designed to, or could be expected to, result
in the disposition by any person at any time in the future of) any of such
shares during the 180-Day Lockup Period; and to cause each (A) director,
(B) officer, (C) each person or entity (other than PII) who is, prior to
the First Closing Date, a shareholder of the Company (if any), and (D) each
person or entity who will receive shares of Common Stock in connection with
Share Exchange or any of the Acquisitions, to furnish to the
Representatives, prior to the First Delivery Date, a letter or letters, in
form and substance satisfactory to the Representatives, pursuant to which
each such person shall agree not to, directly or indirectly, offer for
sale, sell, assign, pledge, issue, distribute, grant any option or enter
into any contract for the sale or otherwise transfer or dispose of any
shares of Common Stock or any other securities of the Company or any
security or other instrument which by its terms is convertible into or
exercisable or exchangeable for shares of Common Stock or other securities
of the Company, whether now owned or hereafter acquired by such person or
entity or with respect to which such person or entity has or hereafter
acquires the power of disposition, including, without limitation, any
shares of Common Stock issuable under any employee stock option or warrant,
during (A) the 180-Day Lockup Period, without the prior written consent of
Lehman Brothers Inc., and (B) the period of one year from the date of the
Prospectus (the "One-
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Year Lockup Period"), without the prior written consent of the Company,
PROVIDED that the Company will not waive the foregoing restrictions
applicable during the One-Year Lockup Period with respect to any shares
of Common Stock (or other securities) without first notifying and
consulting with Lehman Brothers, Inc.;
(j) To apply the net proceeds from the sale of the Stock as set forth
in the Prospectus; and
(k) Prior to filing with the Commission any reports with respect to
the offering and sale of the Stock and the application of the proceeds
therefrom as may be required under the Securities Act, the Rules and
Regulations, the Exchange Act or the rules and regulations of the
Commission thereunder, to furnish a copy thereof to the counsel for the
Underwriters and receive and consider its comments thereon, and to deliver
promptly to the Representatives a signed copy of each such report filed by
it with the Commission.
6. EXPENSES. The Company agrees to pay (a) the costs incident to
the authorization, issuance, sale and delivery of the Stock and any taxes
payable in that connection; (b) the costs incident to the preparation, printing
and filing under the Securities Act of the Registration Statement and any
amendments and exhibits thereto; (c) the costs of distributing the Registration
Statement as originally filed and each amendment thereto and any post-effective
amendments thereof (including, in each case, exhibits), any Preliminary
Prospectus, the Prospectus and any amendment or supplement to the Prospectus,
all as provided in this Agreement; (d) the costs of producing and distributing
this Agreement and any other related documents in connection with the offering,
purchase, sale and delivery of the Stock; (e) the filing fees incident to
securing any required review by the National Association of Securities Dealers,
Inc. of the terms of sale of the Stock; (f) any applicable listing or other
fees; (g) the fees and expenses of qualifying the Stock under the securities
laws of the several jurisdictions as provided in Section 5(h) and of preparing,
printing and distributing a Blue Sky Memorandum, if any (including related fees
and expenses of counsel to the Underwriters), (h) all costs and expenses of the
Underwriters, including the fees and disbursements of counsel for the
Underwriters, incident to the offer and sale of shares of the Stock by the
Underwriters to employees and persons having business relationships with the
Company, as described in Section 3, (i) all fees and expenses of an independent
underwriter; and (j) all other costs and expenses incident to the performance of
the obligations of the Company under this Agreement; PROVIDED that, except as
provided in this Section 6 and in Section 11, the Underwriters shall pay their
own costs and expenses, including the costs and expenses of their counsel, any
transfer taxes on the Stock which they may sell and the expenses of advertising
any offering of the Stock made by the Underwriters.
7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The respective
obligations of the Underwriters hereunder are subject to the accuracy, when made
and on each Delivery Date, of the representations and warranties of the Company
contained herein, to the performance by the Company of its obligations
hereunder, and to each of the following additional terms and conditions:
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(a) The Prospectus shall have been timely filed with the Commission
in accordance with Section 5(a); no stop order suspending the effectiveness
of the Registration Statement or any part thereof shall have been issued
and no proceeding for that purpose shall have been initiated or threatened
by the Commission; and any request of the Commission for inclusion of
additional information in the Registration Statement or the Prospectus or
otherwise shall have been complied with.
(b) No Underwriter shall have discovered and disclosed to the Company
on or prior to such Delivery Date that the Registration Statement or the
Prospectus or any amendment or supplement thereto contains an untrue
statement of a fact which, in the opinion of counsel for the Underwriters,
is material or omits to state a fact which, in the opinion of such counsel,
is material and is required to be stated therein or is necessary to make
the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Stock, the
Registration Statement and the Prospectus, and all other legal matters
relating to this Agreement and the transactions contemplated hereby, shall
be reasonably satisfactory in all material respects to counsel for the
Underwriters, and the Company shall have furnished to such counsel all
documents and information that they may reasonably request to enable them
to pass upon such matters.
(d) Jackson Walker L.L.P. shall have furnished to the Representatives
its written opinion, as counsel to the Company, addressed to the
Underwriters and dated such Delivery Date, in form and substance
satisfactory to the Representatives, to the effect that:
(i) The Company and PII have been duly incorporated and are
validly existing as corporations in good standing under the laws of
the State of Delaware, are duly registered and qualified to transact
business and are in good standing as foreign corporations in each
jurisdiction in which their respective ownership or lease of property
or the conduct of their respective businesses requires such
qualification (except where the failure to register or qualify would
not have a Material Adverse Effect), and have all power and authority
necessary to own, lease, operate or hold their respective properties
and conduct the businesses in which they are engaged and, to such
counsel's knowledge, neither the Company nor PII is in violation of
any provision of its charter, by-laws or other organizational
documents;
(ii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company (A) have been duly and validly authorized and issued, (B) are
fully paid and nonassessable, (C) have not been issued in violation of
any preemptive or similar rights under the Company's charter or
by-laws, the laws of the State of Delaware or, to the knowledge of such
counsel, otherwise and (D) conform to the description thereof contained
in the Prospectus; after giving effect to the Share Exchange and the
closing of the Acquisitions and the issuance of the shares of
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Common Stock contemplated by the Acquisition Agreements, but without
giving effect to the issuance of the Stock pursuant to the terms of
this Agreement, the Company has issued and outstanding ________ shares
of Common Stock and no shares of preferred stock; and all of the
issued shares of capital stock of PII (A) have been duly and validly
authorized and issued, (B) are fully paid and nonassessable, (C) have
not been issued in violation of any preemptive or similar rights under
PII's charter or by-laws, the laws of the State of Delaware or, to the
knowledge of such counsel, otherwise and (D) after giving effect to
the Share Exchange, will be owned directly by the Company, free and
clear of all liens, encumbrances, equities or claims;
(iii) The shares of the Stock being issued and sold by the
Company to the Underwriters on such Delivery Date have been duly and
validly authorized and, when issued and delivered against payment
therefor as provided in this Agreement, will be duly and validly
issued, fully paid and nonassessable and will not have been issued in
violation of or be subject to any preemptive or similar rights under
the Company's charter or by-laws, the laws of the State of Delaware
or, to the knowledge of such counsel, otherwise;
(iv) Except as disclosed in the Prospectus, there are no
restrictions upon the voting or transfer of any shares of the Stock
pursuant to the Company's charter or by-laws, the laws of the State of
Delaware or, to the knowledge of such counsel, otherwise;
(v) The form of certificate representing shares of Common Stock
conforms to the applicable requirements of the Delaware General
Corporation Law;
(vi) Other than as set forth in the Prospectus, such counsel does
not know of any legal or governmental proceedings (domestic or
foreign) pending to which the Company or PII is a party or of which
any property or assets of the Company or PII is the subject which, if
determined adversely to the Company or PII, might, singly or in the
aggregate, have a Material Adverse Effect; and such counsel does not
know of any such proceedings that are threatened by any governmental
authorities or threatened by others;
(vii) The Registration Statement was declared effective under
the Securities Act, the Prospectus was filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations and, to the
knowledge of such counsel after making telephone inquiries to the
staff of the Commission on such Delivery Date, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceeding for that purpose is pending or threatened by
the Commission;
(viii) The Registration Statement and the Prospectus and any
further amendments or supplements thereto made by the Company prior to
such Delivery Date (other than the financial statements and schedules
(including the notes thereto and the auditors' reports thereon) and
the other financial data included therein and the exhibits thereto, as
to which such counsel need express no opinion) appear on their face to
have been appropriately
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responsive in all material respects to the requirements of the
Securities Act and the Rules and Regulations;
(ix) To the knowledge of such counsel, (i) there are no
contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments required to be described or referred to in the
Registration Statement or to be filed as exhibits thereto other than
those described or referred to therein or filed as exhibits thereto
and (ii) the descriptions thereof or references thereto are correct;
(x) The Company has full corporate power and authority to enter
into this Agreement and to issue, sell and deliver the Stock to the
Underwriters as provided herein, and this Agreement has been duly
authorized, executed and delivered by the Company;
(xi) The execution and delivery of this Agreement, the issuance
and sale of the shares of Stock being delivered on such Delivery Date
by the Company and the compliance by the Company with all of the
provisions of this Agreement and the consummation of the transactions
contemplated hereby will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or PII is a
party or by which the Company or PII is bound or to which any of the
property or assets of the Company or PII is subject and which has been
filed as an exhibit to the Registration Statement, nor will such
actions result in any violation of the provisions of the charter or
by-laws of the Company or PII or any statute or any order, rule or
regulation known to such counsel of any court or governmental agency
or body (whether domestic or foreign) having jurisdiction over the
Company or PII or any of their properties or assets, other than (i)
state securities laws of the various states or other jurisdictions or
(ii) dental regulations (as to which such counsel shall deliver a
reasoned opinion as contemplated by Subsection 7(d)(xii) below); and,
except for the registration of the Stock under the Securities Act and
such consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act and
applicable state securities laws in connection with the purchase and
distribution of the Stock by the Underwriters, no consent, approval,
authorization or order of, or filing or registration with, any such
court or governmental agency or body is required for the execution,
delivery and performance of this Agreement by the Company or the
consummation of the transactions contemplated hereby;
(xii) The Company has the corporate power and authority to
enter into the Transaction Agreements to which it is a party and to
perform its obligations thereunder; the execution and delivery of, and
the performance by the Company of its obligations under, the
Transaction Agreements have been duly and validly authorized by the
Company, and each Transaction Agreement has been duly executed and
delivered by the Company and is a legal, valid and binding agreement
of the Company, enforceable in accordance with its terms, except as
that enforceability may be subject to the effect of (A) any applicable
bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting creditors' rights
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<PAGE>
generally and (B) general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law);
PROVIDED that the opinion set forth in this subparagraph with respect
to enforceability of the Transaction Agreements will be subject to a
reasoned analysis of the prohibition against the corporate practice of
dentistry in the State of Texas established by the Tex. Health & Safety
Code Ann. arts. 4548a and 4551a(8) and the line of analogous court
decisions relating to the corporate practice of medicine including
FLYNN BROS., INC. V. FIRST MEDICAL ASSOC., 715 S.W.2d 782
(Tex.App.--Dallas 1986, writ ref'd n.r.e.);
(xiii) Each of the Acquisitions has been consummated pursuant
to the terms of the Acquisition Agreement related thereto;
(xiv) The Share Exchange has been completed pursuant to the
terms of the Share Exchange Agreement;
(xv) The Stock and the shares of Common Stock issued in
connection with the Share Exchange and the Acquisitions have been
approved for inclusion on the Nasdaq National Market;
(xvi) Neither the Company nor any subsidiary is an
"investment company" within the meaning of such term under the
Investment Company Act of 1940 and the rules and regulations of the
Commission thereunder; and
(xvii) To such counsel's knowledge, there are no contracts,
agreements or understandings between the Company and any person
granting such person the right to (i) require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company owned or to be owned by such person, (ii)
require the Company to include such securities in the securities
registered pursuant to the Registration Statement or (iii) except as
described in the Prospectus, require that any securities be registered
pursuant to any other registration statement filed by the Company
under the Securities Act.
In rendering such opinion, such counsel may state that its opinion is
limited to matters governed by the Federal laws of the United States of
America, the laws of the State of Texas and the corporate laws of the State
of Delaware. Such counsel shall also have furnished to the Representatives
a written statement, addressed to the Underwriters and dated such Delivery
Date, in form and substance satisfactory to the Representatives, to the
effect that (x) such counsel has acted as counsel to the Company in
connection with the preparation of the Registration Statement, and (y)
based on the foregoing, no facts have come to the attention of such counsel
which lead it to believe that the Registration Statement (other than (i)
the financial statements and schedules (including the notes thereto and the
auditors' reports thereon) included therein or omitted therefrom and (ii)
the other financial information contained therein or omitted therefrom, and
it being understood that such counsel is not, by this statement, making any
19
<PAGE>
statement as to the accuracy of any statement or representation contained
in any exhibit to the Registration Statement), as of the Effective Date,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make
the statements therein not misleading, or that the Prospectus contains any
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The foregoing opinion and statement may be qualified by a
statement to the effect that such counsel does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus.
(e) Kimberlee K. Rozman, general counsel of the Company, shall have
furnished to the Representatives her opinion, addressed to the Underwriters
and dated such Delivery Date, in form and substance satisfactory to the
Representatives, to the effect that:
(i) The Company and PII have been duly incorporated and are
validly existing as corporations in good standing under the laws of
the State of Delaware, are duly registered and qualified to transact
business and are in good standing as foreign corporations in each
jurisdiction in which their respective ownership or lease of property
or the conduct of their respective businesses requires such
qualification (except where the failure so to register or qualify
would not have a Material Adverse Effect), and have all power and
authority necessary to own, lease, operate or hold their respective
properties and conduct the businesses in which they are engaged and,
to such counsel's knowledge, neither the Company nor PII is in
violation of any provision of its charter, by-laws or other
organizational documents;
(ii) The shares of the Stock being issued and sold by the Company
to the Underwriters on such Delivery Date have been duly and validly
authorized and, when issued and delivered against payment therefor as
provided in this Agreement, will be duly and validly issued, fully
paid and nonassessable and will not have been issued in violation of
or be subject to any preemptive or similar rights under the Company's
charter or by-laws, the laws of the State of Delaware or, to the
knowledge of such counsel, otherwise;
(iii) There are no restrictions upon the voting or transfer
of any shares of the Stock pursuant to the Company's charter or
by-laws, the laws of the State of Delaware or, to such counsel's
knowledge, otherwise;
(iv) To the best of such counsel's knowledge and other than as
set forth in the Prospectus, there are no legal or governmental
proceedings (domestic or foreign) pending to which the Company or PII
is a party or of which any property or assets of the Company or PII is
the subject which, if determined adversely to the Company or PII,
might, singly or in the aggregate, have a Material Adverse Effect;
and, to the best of such counsel's knowledge, no such proceedings are
threatened or contemplated by any governmental authorities or
threatened by others;
20
<PAGE>
(v) The Company has full corporate power and authority to enter
into this Agreement and to issue, sell and deliver the Stock to the
Underwriters as provided herein, and this Agreement has been duly
authorized, executed and delivered by the Company;
(vi) The execution and delivery of this Agreement, the issuance
and sale of the shares of Stock being delivered on such Delivery Date
by the Company and the compliance by the Company with all of the
provisions of this Agreement and the consummation of the transactions
contemplated hereby will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument known to such counsel to which the
Company or PII is a party or by which the Company or PII is bound or
to which any of the property or assets of the Company or PII is
subject, nor will such actions result in any violation of the
provisions of the charter or by-laws of the Company or PII or any
statute or any order, rule or regulation known to such counsel of any
court or governmental agency or body (whether domestic or foreign)
having jurisdiction over the Company or PII or any of their properties
or assets, other than state securities laws of the various states or
other jurisdictions; and, except for the registration of the Stock
under the Securities Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under the Exchange
Act and applicable state securities laws in connection with the
purchase and distribution of the Stock by the Underwriters, no
consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body is
required for the execution, delivery and performance of this Agreement
by the Company or the consummation of the transactions contemplated
hereby;
(vii) The Company has the corporate power and authority to
enter into the Transaction Agreements to which it is a party and to
perform its obligations thereunder; the execution and delivery of, and
the performance by the Company of its obligations under, the
Transaction Agreements have been duly and validly authorized by the
Company, and each Transaction Agreement has been duly executed and
delivered by the Company and is a legal, valid and binding agreement
of the Company, enforceable in accordance with its terms, except as
that enforceability may be subject to the effect of (A) any applicable
bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting creditors' rights generally and (B) general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law); PROVIDED that the
opinion set forth in this subparagraph with respect to enforceability
of the Transaction Agreements in each of the applicable jurisdictions
may be subject to a reasoned analysis of the prohibition against the
corporate practice of dentistry in the applicable jurisdiction, as set
forth in an opinion of other counsel delivered as provided in the last
paragraph of this Section 7(e);
(viii) To the best of such counsel's knowledge, (i) there are
no contracts or other documents that are required to be described or
referred to in the Prospectus or to be filed as exhibits to the
Registration Statement that have not been described or referred to
therein or filed as exhibits to the Registration Statement, (ii) the
descriptions thereof or references
21
<PAGE>
thereto are correct and (iii) no default exists in the due
performance or observance of any material obligation, agreement,
covenant or condition contained in any contract, indenture,
mortgage, loan agreement, note, lease or other instrument so
described, referred to or filed, except for such defaults that
would not, singly or in the aggregate, have a Material Adverse
Effect;
(ix) The Company has full corporate power and authority, and all
necessary governmental authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all governmental
regulatory officials and bodies (except where the failure so to have
any such authorizations, approvals, orders, licenses, certificates,
franchises or permits would not, singly or in the aggregate, have a
Material Adverse Effect), to own its properties and to conduct its
business in the manner described in the Prospectus;
(x) The Company's conduct of its business complies in all
material respects with the laws and governmental regulations relating
to the corporate practice of dentistry in each jurisdiction in which
it conducts its business (except where the failure to comply would
not, singly or in the aggregate, have a Material Adverse Effect);
(xi) Each of the Acquisitions has been consummated pursuant to
the terms of the Acquisition Agreement related thereto;
(xii) The Share Exchange has been completed pursuant to the
terms of the Share Exchange Agreement;
(xiii) To the best of such counsel's knowledge, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to (i) require the Company to
file a registration statement under the Securities Act with respect to
any securities of the Company owned or to be owned by such person,
(ii) require the Company to include such securities in the securities
registered pursuant to the Registration Statement or (iii) except as
described in the Prospectus, require that any securities be registered
pursuant to any other registration statement filed by the Company
under the Securities Act; and
(xiv) The statements contained in the Prospectus under the
captions "Risk Factors--Absence of Combined Operating History,"
"Risk Factors--Reliance on Affiliated Practices and Dentists,"
"Risk Factors--Government Regulation," "Risk Factors--Potential
Effect of Shares Eligible for Future Sale on Price of Common
Stock," "Risk Factors--Certain Anti-takeover Provisions,"
"Business--Summary of Terms of Acquisitions," "Business--Service
Agreements," "Business--Dentist Agreement," "Business--Dentist
Employment Agreements," "Business--Litigation and Insurance,"
"Business--Government Regulation," "Management--Executive
Compensation," "Management--Employment Agreements,"
"Management--1997 Stock Compensation Plan," "Certain Transactions,"
"Description of Capital Stock," "Shares Eligible for Future Sale"
and "Underwriting," and in Items 14 and
22
<PAGE>
15 of Part II of the Registration Statement, insofar as such
statements purport to summarize the provisions of the documents or
agreements referred to therein or matters of law or legal
conclusions, are true and correct in all material respects and
constitute a fair summary thereof.
In rendering such opinion, such counsel may rely, to the extent she
considers such reliance appropriate, upon the opinion of other counsel
retained by her or the Company (which may include local counsel referred to
in Section 7(f)), PROVIDED that such other counsel is satisfactory to
counsel for the Underwriters, furnishes a copy of its opinion to the
Representatives and specifically addresses such opinion to the
Representatives. Such counsel shall also have furnished to the
Representatives a written statement, addressed to the Underwriters and
dated such Delivery Date, in form and substance satisfactory to the
Representatives, to the effect that (x) she has acted as general counsel of
the Company since its inception and, as such, is familiar with the Company,
its operations and the terms and conditions of the Acquisitions and the
Service Agreements and has acted as general counsel of the Company in
connection with the preparation of the Registration Statement and (y) based
on the foregoing, no facts have come to her attention which lead her to
believe that the Registration Statement (other than the financial
statements and schedules (including the notes thereto and the auditors'
reports thereon) included therein or omitted therefrom, and it being
understood that such counsel is not, by this statement, making any
statement as to the accuracy of any statement or representation contained
in any exhibit to the Registration Statement), as of the Effective Date,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make
the statements therein not misleading, or that the Prospectus contains any
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(f) The Representatives shall have received from local counsel to the
Company licensed to practice in each jurisdiction in which a PA Affiliate
is organized or doing business, which local counsel shall be satisfactory
to the Representatives, such opinions, dated such Delivery Date and
expressly addressed to the Representatives, on behalf of the Underwriters,
each in substantially the form of the opinion letter set forth in Exhibit A
hereto, with such changes thereto as shall be acceptable to the
Representatives. The Representatives shall have received from local
counsel to each of the PA Affiliates licensed to practice in each
jurisdiction in which a PA Affiliate is organized or doing business, which
local counsel shall be satisfactory to the Representatives, such opinions,
dated such Delivery Date and expressly addressed to the Representatives, on
behalf of the Underwriters, each in substantially the form of the opinion
letter set forth in Exhibit B hereto, with such changes thereto as shall be
acceptable to the Representatives.
(g) The Representatives shall have received from Baker & Botts,
L.L.P., counsel for the Underwriters, such opinion or opinions, dated such
Delivery Date, with respect to the issuance and sale of the Stock, the
Registration Statement, the Prospectus and other related matters as
23
<PAGE>
the Representatives may reasonably require, and the Company shall
have furnished to such counsel such documents as they reasonably
request for the purpose of enabling them to pass upon such matters.
(h) At the time of execution of this Agreement, the Representatives
shall have received from Coopers & Lybrand LLP a letter, in form and
substance satisfactory to the Representatives, addressed to the
Underwriters and dated the date hereof, (i) confirming that they are
independent public accountants within the meaning of the Securities Act and
are in compliance with the applicable requirements relating to the
qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission, (ii) stating, as of the date hereof (or, with respect to
matters involving changes or developments since the respective dates as of
which specified financial information is given in the Prospectus, as of a
date not more than five days prior to the date hereof), the conclusions and
findings of such firm with respect to the financial information and other
matters ordinarily covered by accountants' "comfort letters" to
underwriters in connection with registered public offerings.
(i) With respect to the letter of Coopers & Lybrand LLP referred to
in the preceding paragraph and delivered to the Representatives
concurrently with the execution of this Agreement (the "initial letter"),
the Company shall have furnished to the Representatives a letter (the
"bring-down letter") of such accountants, addressed to the Underwriters and
dated such Delivery Date, (i) confirming that they are independent public
accountants within the meaning of the Securities Act and are in compliance
with the applicable requirements relating to the qualification of
accountants under Rule 2-01 of Regulation S-X of the Commission,
(ii) stating, as of the date of the bring-down letter (or, with respect to
matters involving changes or developments since the respective dates as of
which specified financial information is given in the Prospectus, as of a
date not more than five days prior to the date of the bring-down letter
(PROVIDED that such date shall not be prior to the Effective Date)), the
conclusions and findings of such firm with respect to the financial
information and other matters covered by the initial letter and
(iii) confirming in all material respects the conclusions and findings set
forth in the initial letter.
(j) The Company shall have furnished to the Representatives a
certificate, dated such Delivery Date, of its Chairman of the Board or its
President and Chief Executive Officer and its Chief Financial Officer
stating that:
(i) The representations, warranties and agreements of the
Company in Section 1 are true and correct as of such Delivery Date;
the Company has complied with all of its agreements contained herein;
and the conditions set forth herein have been fulfilled; and
(ii) They have carefully examined the Registration Statement and
the Prospectus and, in their opinion (A) as of the Effective Date, the
Registration Statement and Prospectus did not include any untrue
statement of a material fact and did not omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading,
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<PAGE>
and (B) since the Effective Date, no event has occurred which
should have been set forth in a supplement or amendment to the
Registration Statement or the Prospectus.
(k) (i) None of the Company, PII or the PA Affiliates shall have
sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus,
or (ii) since such date there shall not have been any material change in
the capital stock or long-term or short-term debt of the Company, PII or
any of the PA Affiliates or any change, or any development involving a
prospective change, in or affecting the general affairs, management,
consolidated financial position, stockholders' equity, results of
operations or prospects of the Company and PII, otherwise than as set forth
or contemplated in the Prospectus, the effect of which, in any such case
described in clause (i) or (ii), is, in the judgment of the Representatives
so material and adverse as to make it impracticable or inadvisable to
proceed with the public offering or the delivery of the Stock being
delivered on such Delivery Date on the terms and in the manner contemplated
in the Prospectus.
(l) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange or the American Stock Exchange or
in the over-the-counter market, or trading in any securities of the Company
on any exchange or in the over-the-counter market, shall have been
suspended or minimum prices shall have been established on any such
exchange or such market by the Commission, by such exchange or by any other
regulatory body or governmental authority having jurisdiction, (ii) a
banking moratorium shall have been declared by Federal or state
authorities, (iii) the United States shall have become engaged in
hostilities, there shall have been an escalation in hostilities involving
the United States or there shall have been a declaration of a national
emergency or war by the United States or (iv) there shall have occurred
such a material adverse change in general economic, political or financial
conditions (or the effect of international conditions on the financial
markets in the United States shall be such) as to make it, in the judgment
of the Representatives or a majority in interest of the several
Underwriters, impracticable or inadvisable to proceed with the public
offering or delivery of the Stock being delivered on such Delivery Date on
the terms and in the manner contemplated in the Prospectus.
(m) The Stock, together with the shares of Common Stock issued or to
be issued in connection with the Share Exchange and the Acquisitions, shall
have been approved for inclusion on the Nasdaq National Market.
(n) The Share Exchange shall have been completed pursuant to the
terms of the Share Exchange Agreement.
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(o) The Acquisitions shall have been consummated on the terms set
forth in the Registration Statement and the Acquisition Agreements, without
waiver or modification of any material terms or provisions of any
Acquisition Agreement, except as may be approved by the Representatives.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company (including, for purposes of this Section 8, any
subsidiaries of the Company) shall indemnify and hold harmless each
Underwriter, its officers and employees and each person, if any, who
controls any Underwriter within the meaning of the Securities Act, from and
against any loss, claim, damage or liability, joint or several, or any
action in respect thereof (including, but not limited to, any loss, claim,
damage, liability or action relating to purchases and sales of Stock), to
which that Underwriter, officer, employee or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained
(A) in any Preliminary Prospectus, the Registration Statement or the
Prospectus or in any amendment or supplement thereto or (B) in any blue sky
application or other document prepared or executed by the Company (or based
upon any written information furnished by the Company) specifically for the
purpose of qualifying any or all of the Stock under the securities laws of
any state or other jurisdiction (any such application, document or
information being hereinafter called a "Blue Sky Application"), (ii) the
omission or alleged omission to state in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or in any amendment or supplement
thereto, or in any Blue Sky Application any material fact required to be
stated therein or necessary to make the statements therein not misleading
or (iii) any act or failure to act or any alleged act or failure to act by
any Underwriter in connection with, or relating in any manner to, the Stock
or the offering contemplated hereby, and which is included as part of or
referred to in any loss, claim, damage, liability or action arising out of
or based upon matters covered by clause (i) or (ii) above (PROVIDED that
the Company shall not be liable under this clause (iii) to the extent that
it is determined in a final judgment by a court of competent jurisdiction
that such loss, claim, damage, liability or action resulted directly from
any such acts or failures to act undertaken or omitted to be taken by such
Underwriter through its gross negligence or willful misconduct), and shall
reimburse each Underwriter and each such officer, employee or controlling
person promptly upon demand for any legal or other expenses reasonably
incurred by that Underwriter, officer, employee or controlling person in
connection with investigating or defending or preparing to defend against
any such loss, claim, damage, liability or action as such expenses are
incurred; PROVIDED, HOWEVER, that the Company shall not be liable in any
such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, any untrue statement or alleged
untrue statement or omission or alleged omission made in any
26
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Preliminary Prospectus, the Registration Statement or the Prospectus, or
in any such amendment or supplement, or in any Blue Sky Application, in
reliance upon and in conformity with written information concerning such
Underwriter furnished to the Company through the Representatives by or
on behalf of any Underwriter specifically for inclusion therein. The
foregoing indemnity agreement is in addition to any liability which the
Company may otherwise have to any Underwriter or to any officer,
employee or controlling person of that Underwriter.
(b) Each Underwriter, severally and not jointly, shall indemnify and
hold harmless the Company, its officers and employees, each of its
directors (including any person who, with his or her consent, is named in
the Registration Statement as about to become a director of the Company),
and each person, if any, who controls the Company within the meaning of the
Securities Act, from and against any loss, claim, damage or liability,
joint or several, or any action in respect thereof, to which the Company or
any such director, officer or controlling person may become subject, under
the Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained (A) in
any Preliminary Prospectus, the Registration Statement or the Prospectus or
in any amendment or supplement thereto, or (B) in any Blue Sky Application
or (ii) the omission or alleged omission to state in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or in any
amendment or supplement thereto, or in any Blue Sky Application any
material fact required to be stated therein or necessary to make the
statements therein not misleading, but in each case only to the extent that
the untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written
information concerning such Underwriter furnished to the Company through
the Representatives by or on behalf of that Underwriter specifically for
inclusion therein, and shall reimburse the Company and any such director,
officer or controlling person for any legal or other expenses reasonably
incurred by the Company or any such director, officer or controlling person
in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses
are incurred. The foregoing indemnity agreement is in addition to any
liability which any Underwriter may otherwise have to the Company or any
such director, officer, employee or controlling person.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; PROVIDED, HOWEVER,
that the failure to notify the indemnifying party shall not relieve it from
any liability that it may have under this Section 8 except to the extent it
has been materially prejudiced by such failure and, PROVIDED FURTHER, that
the failure to notify the indemnifying party shall not relieve it from any
liability that it may have to an indemnified party otherwise than under
this Section 8. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate
27
<PAGE>
therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After
notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying
party shall not be liable to the indemnified party under this Section 8
for any legal or other expenses subsequently incurred by the indemnified
party in connection with the defense thereof other than reasonable costs
of investigation; PROVIDED, HOWEVER, that the Representatives shall have
the right to employ counsel to represent jointly the Representatives and
those other Underwriters and their respective officers, employees and
controlling persons who may be subject to liability arising out of any
claim in respect of which indemnity may be sought by the Underwriters
against the Company under this Section 8 if, in the reasonable judgment
of the Representatives, it is advisable for the Representatives and
those Underwriters, officers, employees and controlling persons to be
represented by separate counsel, and, in that event, the fees and
expenses of such separate counsel (in addition to the fees and expenses
of any local counsel) shall be paid by the Company. No indemnifying
party shall (i) without the prior written consent of the indemnified
parties (which consent shall not be unreasonably withheld), settle or
compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of
which indemnification or contribution may be sought hereunder (whether
or not the indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or consent includes
a full and unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding, or (ii)
be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but
if settled with the consent of the indemnifying party or if there be a
final judgment of the plaintiff in any such action, the indemnifying
party agrees to indemnify and hold harmless any indemnified party from
and against any loss or liability by reason of such settlement or
judgment.
(d) If the indemnification provided for in this Section 8 shall for
any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 8(a) or 8(b) in respect of any loss, claim,
damage or liability, or any action in respect thereof, referred to therein,
then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate
to reflect the relative benefits received by the Company, on the one hand,
and the Underwriters, on the other, from the offering of the Stock or (ii)
if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) above but also the relative
fault of the Company, on the one hand, and the Underwriters, on the other,
with respect to the statements or omissions which resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by
the Company, on the one hand, and the Underwriters, on the other, with
respect to such offering shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Stock purchased under this
Agreement (before deducting expenses) received by
28
<PAGE>
the Company, on the one hand, and the total underwriting discounts and
commissions received by the Underwriters with respect to the shares of
the Stock purchased under this Agreement, on the other hand, bear to the
total gross proceeds from the offering of the shares of the Stock under
this Agreement, in each case as set forth in the table on the cover page
of the Prospectus. The relative fault shall be determined by reference
to whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to
information supplied by the Company or the Underwriters, the intent of
the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were to be
determined by pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation
that does not take into account the equitable considerations referred to
herein. The amount paid or payable by an indemnified party as a result
of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section 8(d) shall be deemed to include, for
purposes of this Section 8(d), any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of
this Section 8(d), no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the
Stock underwritten by it and distributed to the public was offered to
the public exceeds the amount of any damages which such Underwriter has
otherwise paid or become liable to pay by reason of any untrue or
alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute as provided in this Section 8(d)
are several in proportion to their respective underwriting obligations
and not joint.
(e) The Underwriters severally confirm that the statements with
respect to the public offering of the Stock by the Underwriters set forth
on the cover page of, the legend concerning over-allotments on the inside
front cover page of, and the concession and reallowance figures appearing
under the caption "Underwriting" in, the Prospectus are correct, and the
Underwriters and the Company agree that such information constitutes the
only information concerning any of the Underwriters furnished in writing to
the Company by or on behalf of any of the Underwriters specifically for
inclusion in the Registration Statement and the Prospectus.
9. DEFAULTING UNDERWRITERS.
If, on either Delivery Date, any Underwriter defaults in the
performance of its obligations under this Agreement, the remaining
non-defaulting Underwriters shall be obligated to purchase the Stock that the
defaulting Underwriter agreed but failed to purchase on such Delivery Date in
the respective proportions which the number of shares of the Firm Stock set
opposite the name of each remaining non-defaulting Underwriter in Schedule 1
hereto bears to the total number of shares of the Firm Stock set opposite the
names of all the remaining non-defaulting Underwriters in Schedule 1 hereto;
PROVIDED, HOWEVER, that the remaining non-defaulting Underwriters shall not be
obligated
29
<PAGE>
to purchase any of the Stock on such Delivery Date if the total number
of shares of the Stock which the defaulting Underwriter or Underwriters agreed
but failed to purchase on such date exceeds 9.09% of the total number of shares
of the Stock to be purchased on such Delivery Date, and any remaining
non-defaulting Underwriter shall not be obligated to purchase more than 110% of
the number of shares of the Firm Stock that it agreed to purchase on such
Delivery Date pursuant to the terms of Section 2. If the foregoing maximums are
exceeded, the remaining non-defaulting Underwriters, or those other underwriters
satisfactory to the Representatives who so agree, shall have the right, but
shall not be obligated, to purchase, in such proportion as may be agreed upon
among them, all of the Stock to be purchased on such Delivery Date. If the
remaining Underwriters or other underwriters satisfactory to the Representatives
do not elect to purchase the shares which the defaulting Underwriter or
Underwriters agreed but failed to purchase on such Delivery Date, this Agreement
(or, with respect to the Second Delivery Date, the obligation of the
Underwriters to purchase, and of the Company to sell, the Option Stock) shall
terminate without liability on the part of any non-defaulting Underwriter or the
Company, except that the Company will continue to be liable for the payment of
expenses to the extent set forth in Sections 6 and 11. As used in this
Agreement, the term "Underwriter" includes, for all purposes of this Agreement
unless the context requires otherwise, any party not listed in Schedule 1 hereto
who, pursuant to this Section 9, purchases Firm Stock which a defaulting
Underwriter agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Company for damages caused by its default. If
other underwriters are obligated or agree to purchase the Stock of a defaulting
or withdrawing Underwriter, either the Representatives or the Company may
postpone the Delivery Date for up to seven full business days in order to effect
any changes that in the opinion of counsel for the Company or counsel for the
Underwriters may be necessary in the Registration Statement, the Prospectus or
in any other document or arrangement.
10. TERMINATION. The obligations of the Underwriters hereunder may
be terminated by the Representatives by notice given to and received by the
Company prior to delivery of and payment for the Firm Stock if, prior to that
time, any of the events described in Sections 7(k) or 7(l), shall have occurred
or if the Underwriters shall decline to purchase the Stock for any reason
permitted under this Agreement.
11. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the Company shall
fail to tender the Stock for delivery to the Underwriters by reason of any
failure, refusal or inability on the part of the Company to perform any
agreement on its part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled by the Company is
not fulfilled, the Company will reimburse the Underwriters for all reasonable
out-of-pocket expenses (including fees and disbursements of counsel) incurred by
the Underwriters in connection with this Agreement and the proposed purchase of
the Stock and, upon demand, the Company shall pay the full amount thereof to the
Representatives. If this Agreement is terminated pursuant to Section 9 by
reason of the default of one or more Underwriters, the Company shall not be
obligated to reimburse any defaulting Underwriter on account of those expenses.
30
<PAGE>
12. NOTICES, ETC. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Underwriters, shall be delivered or sent by mail, telex
or facsimile transmission to Lehman Brothers Inc., Three World Financial
Center, New York, New York 10285, Attention: Syndicate Department
(Facsimile No.: 212-526-6588), with a copy, in the case of any notice
pursuant to Section 8(c), to the Director of Litigation, Office of the
General Counsel, Lehman Brothers Inc., Three World Financial Center, 10th
Floor, New York, New York 10285;
(b) if to the Company, shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Gary S. Glatter (Facsimile
No.: 602-952-0544);
PROVIDED, HOWEVER, that any notice to an Underwriter pursuant to Section
8(c) shall be delivered or sent by mail, telex or facsimile transmission to
such Underwriter at its address set forth in its acceptance telex to the
Representatives, which address will be supplied to any other party hereto by
the Representatives upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company
shall be entitled to act and rely upon any request, consent, notice or
agreement given or made on behalf of the Underwriters by Lehman Brothers Inc.
on behalf of the Representatives.
13. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon the Underwriters, the Company, and
their respective successors. This Agreement and the terms and provisions hereof
are for the sole benefit of only those persons, except that (a) the
representations, warranties, indemnities and agreements of the Company contained
in this Agreement shall also be deemed to be for the benefit of the person or
persons, if any, who control any Underwriter within the meaning of Section 15 of
the Securities Act for the benefit of each and (b) the indemnity agreement of
the Underwriters contained in Section 8(c) of this Agreement shall be deemed to
be for the benefit of directors of the Company, officers of the Company who have
signed the Registration Statement and any person controlling the Company within
the meaning of Section 15 of the Securities Act. Nothing in this Agreement is
intended or shall be construed to give any person, other than the persons
referred to in this Section 13, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
14. SURVIVAL. The respective indemnities, representations,
warranties and agreements of the Company and the Underwriters contained in this
Agreement or made by or on behalf on them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Stock and shall
remain in full force and effect, regardless of any investigation made by or on
behalf of any of them or any person controlling any of them.
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<PAGE>
15. DEFINITION OF THE TERMS "BUSINESS DAY" AND "SUBSIDIARY." For
purposes of this Agreement, (a) "business day" means any day on which the New
York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has the
meaning set forth in Rule 405 of the Rules and Regulations.
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF NEW YORK.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
18. HEADINGS. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
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<PAGE>
If the foregoing correctly sets forth the agreement between the
Company and the Underwriters, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
PENTEGRA DENTAL GROUP, INC.
By:
---------------------------------------
Gary S. Glatter
President and Chief Executive Officer
Accepted:
LEHMAN BROTHERS INC.
RAUSCHER PIERCE REFSNES, INC.
For themselves and as Representatives
of the several Underwriters named
in Schedule I hereto
By LEHMAN BROTHERS INC.
By:
-----------------------------------
AUTHORIZED REPRESENTATIVE
33
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
and
JAMES P. ALLEN, D.D.S.
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. . . . . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
2.1 EXISTENCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. . . . . . . . . . . 3
2.4 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 [INTENTIONALLY DELETED]. . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 [INTENTIONALLY DELETED]. . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 DENTIST'S FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . 3
2.8 LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 CONDITION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. . . . . . . . . . . . . . . . . 3
2.11 INVENTORIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. . . . . . . . . . . . . . . . . . 3
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES . . . . . . . . 4
2.14 LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.16 SUBSEQUENT EVENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.19 LIABILITIES; DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.20 INSURANCE POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.21 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . 6
2.22 ADVERSE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.23 COMPLIANCE WITH LAWS IN GENERAL. . . . . . . . . . . . . . . . . . . . 7
2.24 THIRD PARTY PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.25 NO UNTRUE REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . 7
2.26 BANKING RELATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS . . . . . . . . 8
2.28 PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING . . . . . . . . . . . . . . . . . . 8
3.2 POWER AND AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 NO UNTRUE REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 4. COVENANTS OF DENTIST.
4.1 CONSUMMATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
4.2 BUSINESS OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 ACCESS AND NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. . . . . . . . . . 9
4.5 ACQUISITION PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . . 9
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . 9
4.7 EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 [INTENTIONALLY OMITTED]. . . . . . . . . . . . . . . . . . . . . . . . 10
4.9 REQUIREMENTS TO EFFECT ACQUISITION . . . . . . . . . . . . . . . . . . 10
4.10 ACCOUNTING AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . 10
4.11 WAIVER OF BULK TRANSFER COMPLIANCE . . . . . . . . . . . . . . . . . . 10
4.12 LEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.13 HIRING OF EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.14 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . 10
4.15 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.16 FORMATION OF THE PRACTICE. . . . . . . . . . . . . . . . . . . . . . . 10
4.17 CORPORATE RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.18 POWER AND AUTHORITY FOR TRANSACTIONS . . . . . . . . . . . . . . . . . 11
4.19 NO BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.20 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . 11
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. . . . . . . . . . 11
SECTION 6. COVENANTS OF PENTEGRA AND DENTIST
6.1 FILINGS; OTHER ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 12
7.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . 12
7.3 PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.4 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . 12
7.5 DUE DILIGENCE REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.6 APPROVAL BY THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . 12
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. . . . . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL . . . . . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 8. DENTIST'S CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 13
8.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . 13
8.3 PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.4 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.5 SECURITIES APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 9. CLOSING DELIVERIES
<PAGE>
9.1 DELIVERIES OF DENTIST. . . . . . . . . . . . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.2 INDEMNIFICATION BY PENTEGRA. . . . . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY DENTIST . . . . . . . . . . . . . . . . . . . . . . 16
10.4 INDEMNIFICATION PROCEDURE. . . . . . . . . . . . . . . . . . . . . . . 17
10.5 RIGHT OF SETOFF. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 11. TERMINATION
SECTION 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 18
12.2 INVESTMENTS; COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION. . . . . . . . . . . . . . . . . . . . . 19
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
SECTION 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . 20
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . 21
14.12 NO RULE OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . 21
14.13 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.14 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.15 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.16 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed
as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra") and JIM ALLEN, D.D.S. ("Dentist").
WITNESSETH:
WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires
to receive from Dentist, certain assets of Dentist;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Dentist, the "Target Companies");
WHEREAS, it is intended for Federal income tax purposes that the
transfers contemplated by this Agreement, the Other Agreements and Pentegra's
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an
exchange within the meaning of Section 351 of the Internal Revenue Code of
1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P. or in such other manner as is mutually agreed upon by the parties, on
the day on which the Initial Public Offering of Pentegra Common Stock is
consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and
conditions contained herein, on the Closing Date, Dentist shall convey,
transfer, deliver and assign to Pentegra or any affiliate of Pentegra
designated by Pentegra all of Dentist's right, title and interest in and to
those certain assets described on EXHIBIT 1.1 attached hereto (individually,
"Asset", and collectively "Assets"), free and clear of all obligations,
security interests, claims, liens and encumbrances, except as specifically
assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof.
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and contributed
<PAGE>
hereunder, and Dentist shall retain all of its right, title and interest in
and to, the assets not specifically transferred hereunder, including without
limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Dentist
contained herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Dentist the consideration specified
in ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b)
attached hereto to the extent that such obligations, commitments, liabilities
and indebtedness are current and not otherwise in default. (the "Assumed
Liabilities"). Notwithstanding any contrary provision contained herein,
Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i)
any liability, commitment or obligation or trade payable or indebtedness not
specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on
EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default
under such contracts, leases, commitments or obligations which occurred on or
before the Closing Date; (iii) any liability for any employee benefits
payable to employees of Dentist, including, but not limited to, liabilities
arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any
liability based upon or arising out of a violation of any antitrust or
similar restraint-of-trade laws by Dentist which may arise in connection with
agreements, contracts, commitments or orders for the sale of goods or
provision of services by Dentist reflected on the books of Dentist at or
prior to the Closing Date; (v) any liability based upon or arising out of any
tortious or wrongful actions of Dentist, any licensed professional employee
or independent contractor of Dentist, (vi) any liability for the payment of
any taxes of Dentist, including without limitation, transfer taxes and income
taxes arising from or by reason of the transactions contemplated by this
Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on
real property; nor (viii) any liability incurred or to be incurred pursuant
to any malpractice or other suits or actions pending against Dentist.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement, the
Dentist shall execute and deliver all such deeds, bills of sale, assignments
and assurances and take and do all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under the Assets in Pentegra or otherwise to carry
out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
Dentist hereby represents and warrants to Pentegra as follows:
2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the
State of New York. Dentist does not have any assets, employees or offices
relating to the Business in any state other than the state set forth in the
first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into
and perform this Agreement and the other agreements to be executed and
delivered in connection herewith. This Agreement and all agreements and
documents executed and delivered in connection herewith have been, or will be
as of the Closing Date, duly executed and delivered by Dentist and constitute
or will constitute the legal, valid and binding obligations of Dentist in
accordance with their respective terms, except as may be limited by
<PAGE>
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and
delivery of this Agreement, and the agreements executed and delivered
pursuant to this Agreement or to be executed and delivered on the Closing
Date, do not, and, subject to the receipt of consents described on EXHIBIT
2.4, the consummation of the actions contemplated hereby will not, result in
the acceleration of, any obligation under any mortgage, lien, lease,
agreement, rent, instrument, order, arbitration award, judgment or decree to
which Dentist is a party or by which Dentist is bound, or violate any
material restrictions of any kind to which Dentist is subject, or result in
any lien or encumbrance on any of the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to
the knowledge of Dentist, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Dentist.
2.5 [intentionally deleted].
2.6 [intentionally deleted].
2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for the Business for
its prior two full fiscal years, as well as copies of its unaudited balance
sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance
Sheet" and the latest date thereof shall be referred to as the "Balance Sheet
Date") and any related unaudited statements of income, retained earnings,
schedule of accounts receivable, accounts payable and accrued liabilities,
and cash flows for the twelve months then ended (collectively, with the
related notes thereto, the "Financial Statements"). The Financial Statements
fairly present the financial condition and results of operations of the
Business as of the dates and for the periods indicated and reflect all fixed
and contingent liabilities of Dentist relating to the Business.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Dentist leases, as lessor or lessee, real or personal
property used in operating the Business or related to the Assets. All such
leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with
their respective terms, and there is not under any such lease any existing
default by Dentist, as lessor or lessee, or any condition or event of which
Dentist has knowledge which with notice or lapse of time, or both, would
constitute a default, in respect of which Dentist has not taken adequate
steps to cure such default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Dentist has no knowledge of any
latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances
set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to
<PAGE>
the Closing Date and evidence of such releases of liens and claims shall be
provided to Pentegra on the Closing Date and the Assets shall not be used to
satisfy such liens, claims or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Dentist, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Dentist has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items which are used by the
Dentist in the Business. Set forth in EXHIBIT 2.12 is a listing of all
names of all predecessor companies of Dentist relating to the business of
dentistry, including the names of any entities from whom Dentist previously
acquired significant assets related to the business of dentistry. Except for
off-the-shelf software licenses and except as set forth on EXHIBIT 2.12,
Dentist is not a licensee in respect of any patents, trademarks, service
marks, trade names, copyrights or applications therefor, or manufacturing
processes, formulas or trade secrets or similar items and no such licenses
are necessary for the conduct of the Business or the use of the Assets. No
claim is pending or has been made to the effect that the Assets or the
present or past operations of Dentist in connection with the Assets or
Business infringe upon or conflict with the asserted rights of others to any
patents, patent rights, manufacturing processes, trade names, trademarks,
service marks, inventions, licenses, specialized treatment protocols,
copyrights, formulas, know-how and trade secrets. Dentist has the sole and
exclusive right to use all Assets constituting proprietary rights without
infringing or violating the rights of any third parties and no consents of
any third parties are required for the use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the most recent payroll report of Dentist, showing
all current employees of Dentist relating to the Business or the practice of
dentistry and their current levels of compensation, (b) promised increases in
compensation of employees of Dentist relating to the Business or the practice
of dentistry that have not yet been effected, (c) oral or written employment
agreements, consulting agreements or independent contractor agreements (and
all amendments thereto) to which Dentist is a party and which relate to the
Business, copies of which have been delivered to Pentegra, and (d) all
employee manuals, materials, policies, procedures and work-related rules,
copies of which have been delivered to Pentegra. Dentist is in compliance
with all applicable laws, rules, regulations and ordinances respecting
employment and employment practices. Dentist has not engaged in any unfair
labor practice. There are no unfair labor practices charges or complaints
pending or threatened against Dentist, and Dentist has never been a party to
any agreement with any union, labor organization or collective bargaining
unit.
2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the
Assets is subject to any pending, nor does Dentist have knowledge of any
threatened, litigation, governmental investigation, condemnation or other
proceeding against or relating to or affecting Dentist, the Business, the
Assets or the transactions contemplated by this Agreement, and, to the
knowledge of Dentist, no basis for any such action exists, nor is there any
legal impediment of which Dentist has knowledge to the continued operation of
its business or the use of the Assets in the ordinary course, subject to
consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Dentist ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted by any party
thereto. Except as
<PAGE>
indicated on such Exhibits, there is not under any such Contract any existing
default by Dentist, or any condition or event of which Dentist has knowledge
which with notice or lapse of time, or both, would constitute a default by
Dentist. Dentist has no knowledge of any default by any other party to such
Contracts. Dentist has not received notice of the intention of any party to
any Contract to cancel or terminate any Contract and has no reason to believe
that any amendment or change to any Contract is contemplated by any party
thereto. Other than those contracts, obligations and commitments listed on
EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist is not a party to any
material written or oral agreement, contract, lease or arrangement relating
to the Assets or the Business, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
the Dentist, oral or written, that provide for prepayments or deferred
installment payments (other than in the ordinary course of business
consistent with past practices); or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Dentist on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16,
Dentist has not, since the Balance Sheet Date and in connection with the
Business:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(c) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
<PAGE>
(d) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(e) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Dentist since the Balance Sheet
Date;
(f) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(g) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(h) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(i) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(j) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(k) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting the Business or the Assets,
or experienced any other material adverse change in the financial condition,
assets, prospects, liabilities or business of the Business; or
(l) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Dentist has not received any notice that any tax deficiency or
delinquency has been or may be asserted against Dentist. There are no
audits relating to taxes of Dentist pending or in process or, to the
knowledge of Dentist, threatened. Dentist is not currently the beneficiary of
any waiver of any statute of limitations in respect of taxes nor of any
extension of time within which to file any tax return or to pay any tax
assessment or deficiency. There are no liens or encumbrances relating to
taxes on or threatened against any of the Assets. Dentist has withheld and
paid all taxes required by law to have been withheld and paid by it. Dentist
is not and has not been a party to any tax allocation or sharing agreement or
a member of an affiliated group of corporations filing a consolidated Federal
income tax return. Dentist has delivered to Pentegra correct and complete
copies of Dentist's three most recently filed annual state, local and Federal
income tax returns, together with all examination reports and statements of
deficiencies assessed against or agreed to by Dentist during the three
calendar year period preceding the date of this Agreement. Dentist has
neither made any payments, is obligated to make any payments, or is a party
to any agreement that under any circumstance could obligate it to make any
payments that will not be deductible under Code section 280G.
(b) Dentist does not intend to dispose of any of the shares of Pentegra
Common Stock to be received
<PAGE>
hereunder and is not a party to any plan, arrangement or agreement for the
disposition of such shares. Nothing contained herein shall prohibit Dentist
from selling such shares of Pentegra Common Stock after the designated
holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated
by this Agreement which may be now or hereafter asserted against Pentegra,
Dentist resulting from any action taken by Dentist or their respective agents
or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet or as set forth on EXHIBIT 2.19, Dentist did not
have, as of the Balance Sheet Date, and has not incurred since that date and
will not have incurred as of the Closing Date, any liabilities or obligations
of any nature related to the Business, whether accrued, absolute, contingent
or otherwise, and whether due or to become due, other than those incurred in
the ordinary course of business of the Business. Dentist does not know, or
have reasonable grounds to know, of any basis for the assertion against
Dentist as of the Balance Sheet Date, of any claim or liability of any nature
in any amount not fully reflected or reserved against on the Balance Sheet,
or of any claim or liability of any nature arising since that date other than
those incurred in the ordinary course of business or contemplated by this
Agreement. All indebtedness of Dentist related to the Business (including
without limitation, indebtedness for borrowed money, guaranties and capital
lease obligations) is included on the Balance Sheet or is described on
EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Dentist and each licensed professional of
Dentist carries property, liability, malpractice, workers' compensation and
such other types of insurance as is customary in the industry. Valid and
enforceable policies in such amounts are outstanding and duly in force and
will remain duly in force through the Closing Date. All such policies are
described in EXHIBIT 2.20 attached hereto and true and correct copies have
been delivered to Pentegra. Dentist has not received notice or other
communication from the issuer of any such insurance policy canceling or
amending such policy or threatening to do so. Neither Dentist nor any
licensed professional employee of Dentist has any outstanding claims,
settlements or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Dentist has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement
<PAGE>
(whether or not set forth in a written document); (b) any pension,
profit-sharing, retirement or other plan, program or arrangement; or (c) any
other employee benefit plan, fund or program, including, but not limited to,
those described in SECTION 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20
(individually "Dentist Plan," and collectively "Dentist Plans") have been
operated and administered in all material respects in accordance with all
applicable laws, rules and regulations, including without limitation, ERISA,
the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights
Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age
Discrimination in Employment Act of 1967, as amended, and the related rules
and regulations adopted by those Federal agencies responsible for the
administration of such laws. No act or failure to act by Dentist has
resulted in a "prohibited transaction" (as defined in ERISA) with respect to
the Dentist Plans. No "reportable event" (as defined in ERISA) has occurred
with respect to any of the Dentist Plans. Dentist has not previously made,
is not currently making, and is not obligated in any way to make, any
contributions to any multiemployer plan within the meaning of the
Multi-Employer Pension Plan Amendments Act of 1980. With respect to each
Dentist Plan, either (i) the value of plan assets (including commitments
under insurance contracts) is at least equal to the value of plan liabilities
or (ii) the value of plan liabilities in excess of plan assets is disclosed
on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing
Date, a party to any agreement or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree, rule or
regulation that materially and adversely affects the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Dentist,
the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed
professional employees, and the conduct of the Business and use of the Assets,
have complied with all applicable laws, rules, regulations and licensing
requirements, including, without limitation, the Federal Environmental
Protection Act, the Occupational Safety and Health Act, the Americans with
Disabilities Act and any environmental laws and medical waste laws, and there
exist no violations by Dentist or any licensed professional employee of Dentist
of any Federal, state or local law or regulation. Dentist has not received any
notice of a violation of any Federal, state and local laws, regulations and
ordinances relating to the operations of the Business and Assets and no notice
of any pending inspection or violation of any such law, regulation or ordinance
has been received by Dentist.
2.24 THIRD PARTY PAYORS. Dentist and each licensed professional
employee or independent contractor of Dentist has timely filed all claims or
other reports required to be filed with respect to the purchase of services
by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are
no pending appeals, overpayment determinations, adjustments, challenges,
audit, litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Dentist and each
licensed professional employee of Dentist. Neither Dentist nor any licensed
professional employee of Dentist has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Dentist and Dentist's licensed professional employees has not (a) knowingly
and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist
in this Agreement,
<PAGE>
and no Exhibit or certificate issued or executed by, or information furnished
by Dentist or to be furnished by Dentist to Pentegra pursuant hereto, or in
connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make the statements or facts contained
therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Dentist has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer
or family member of Dentist, or their respective spouses, children or
affiliates, and to the best of Dentist's knowledge, no employee of dentist,
or such employee's respective spouse, childrenor affiliates, owns directly or
indirectly, on an individual or joint basis, any interest in, has a
compensation or other financial arrangement with, or serves as an officer or
director of, any customer or supplier or competitor of the Business or any
organization that has a material contract or arrangement with Dentist
relating to the Business.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Dentist's services which
accounted for more than 10% of revenues of the Business in the preceding
fiscal year. Dentist has good relations with all such payors and other
material payors of the Business and none of such payors has notified Dentist
that it intends to discontinue its relationship with Dentist or to deny any
claims submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Dentist as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits,
<PAGE>
certificates of occupancy, concessions, grants, franchises, licenses,
certificates of need and other governmental authorizations and approvals
required for the conduct of the business of Pentegra or waivers thereof in
all jurisdictions where Pentegra is or will perform services, have been duly
obtained and are in full force and effect, except as would not have a
material adverse effect upon Pentegra. Other than as would not have a
material adverse effect, there are no proceedings pending or, to the
knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
3.4 Legal Proceedings. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has knowledge to the continued operation of its business or the use
of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Dentist pursuant
hereto, or in connection with the transactions contemplated hereby, contains
or will contain any untrue statement of a material fact, or omits or will
omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
SECTION 4. COVENANTS OF DENTIST.
Dentist agrees that between the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and conditions. Dentist agrees to complete the
Exhibits hereto to be provided by him in form and substance satisfactory to
Pentegra.
4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the
Assets in the ordinary
<PAGE>
course. Dentist shall not enter into any lease, contract, indebtedness,
commitment, purchase or sale or acquire or dispose of any capital asset
relating to the Business or the Assets except in the ordinary course of
business. Dentist shall use his best efforts to preserve the Business and
Assets intact and shall not take any action that would have a material
adverse effect on the Business or Assets. Dentist shall use his best efforts
to preserve intact the relationships with payors, customers, suppliers,
patients and others having significant business relations with Dentist.
Dentist shall collect its receivables and pay its trade payables in the
ordinary course of business. Dentist shall not introduce any new method of
management, operations or accounting.
4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized
representatives access to, and make available for inspection, all of the
assets and business of Dentist as the same relates to the Business or the
Assets, including employees, customers and suppliers and permit Pentegra and
its authorized representatives to inspect and make copies of all documents,
records and information with respect to the Business or the Assets, as
Pentegra or its representatives may request. Dentist shall promptly notify
Pentegra in writing of (a) any notice or communication relating to a default
or event that, with notice or lapse of time or both, could become a default,
under any contract, commitment or obligation to which Dentist is a party or
relating to the Business or the Assets, and (b) any adverse change in
Dentist's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall
use his best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby,
including consents described on EXHIBIT 2.4. Dentist shall use his best
efforts to obtain all licenses, permits, approvals or other authorizations
required under any law, rule, regulation, or otherwise to provide the
services of the Practice contemplated by the Service Agreement and to conduct
the intended business of the Practice and operate the Business and use the
Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance
with the provisions hereof, Dentist shall not, and shall use its best efforts
to cause Dentist's employees, agents and representatives not to, initiate,
solicit or encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer, including without limitation, any
proposal or offer to the Dentist, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of Dentist or
engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to
such proposal or offer, and Dentist will immediately cease any such
activities, discussions or negotiations heretofore conducted with respect to
any of the foregoing. Dentist shall immediately notify Pentegra if any such
inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Dentist or any entity might have any liability whatsoever
arising from any insurance, pension plan, employment tax or similar
liability of Dentist to any employee or other person or entity (including,
without limitation, any Dentist Plan and any liability under employment
contracts with Dentist) allocable to services performed prior to the Closing
Date. Dentist acknowledges that the purpose and intent of this covenant is
to assure that Pentegra shall have no liability whatsoever at any time after
the Closing Date with respect to any of Dentist's employees or similar
persons or entities, including, without limitation any Dentist Plan, for the
period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash
compensation of the Dentist (other than in the ordinary course of business)
or other employee or an independent contractor of Dentist, adopt, amend or
terminate any compensation plan, employment agreement, independent contractor
agreement, employee policies and procedures or employee benefit plan, take
any action that could deplete the assets of any employee benefit, or fail to
pay any premium or contribution due or file any report with respect to any
employee benefit plan, or
<PAGE>
take any other actions with respect to its employees or employee matters
which might have an adverse effect upon Dentist, the Business or the Assets.
4.8 [INTENTIONALLY OMITTED].
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best
efforts to take, or cause to be taken, all actions necessary to effect the
acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material
respect the tax or financial accounting methods or practices followed by
Dentist (including any material change in any assumption underlying, or any
method of calculating, any bad debt, contingency or other reserve), except as
may be required by law or generally accepted accounting principles. Dentist
will duly, accurately and timely (without regard to any extensions of time)
file all returns, information statements and other documents relating to
taxes of Dentist required to be filed by it, and pay all taxes required to be
paid by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby
waive any compliance with the applicable state Bulk Transfers Act, if any.
Dentist covenants and agrees that all of the creditors with respect to the
Business and the Assets will be paid in full by Dentist prior to the Closing
Date, except to extent that any liability to such creditors is assumed by
Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall
furnish Pentegra with proof of payment of all creditors with respect to the
Business and the Assets. Notwithstanding the foregoing, Dentist may dispute
the validity or amount of any such creditor's claim without being deemed to
be in violation of this SECTION 4.11, provided that such dispute is in good
faith and does not unreasonably delay the resolution of the claim and
provided, further that Dentist agrees to indemnify Pentegra for such amounts
as is satisfactory to Pentegra.
4.12 LEASE. If Dentist leases any of its premises from the Dentist or
other affiliate of Dentist, Pentegra shall have entered into a building lease
(the "Building Lease") with the owner of such premises on terms and
conditions satisfactory to Pentegra, the terms and conditions of which shall
include, without limitation, (i) a five year initial term plus three
five-year renewal options, (ii) a lease rate equal to the fair market value
lease rate, as agreed to by Pentegra, and (iii) such other provisions to be
acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made
by Pentegra for the purpose of allowing Pentegra to hire those non-dental
employees of Dentist designated by Pentegra, such employment to be effective
as of the Closing Date. Notwithstanding the above, Dentist shall remain
liable under any Dentist Plans for any claims incurred by any employees or
their spouses or dependents, and for all compensation, bonuses, benefits and
other such items and other liabilities related to Dentist's employees
incurred by Dentist prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all
employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall
be treated as "leased employees" (as defined in Code Section 414(n)) of
Dentist and shall be treated as Clinic employees for purposes of eligibility
and participation in Dentist Plans.
4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective
as of the Closing Date.
4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited
liability company, partnership or other legal entity (the "Practice")
approved by Pentegra for the purpose of practicing dentistry and entering
into the Service Agreement. The Practice shall be duly organized, in
existing and in good standing under the laws of the State in which the
Dentist and the Practice are to practice dentistry. The
<PAGE>
Practice shall have all necessary power to own all of its assets and to carry
on its business as such business is now being conducted. The Dentist shall
be the sole member/shareholder/partner of the Practice and own all such
interests free of all security interests, claims, encumbrances and liens.
Each interest in the Practice shall be legally and validly issued and fully
paid and nonassessable. There shall be no outstanding (a) bonds, debentures,
notes or other obligations the holders of which have the right to vote with
the members/partners/shareholders of the Practice on any matter, (b)
securities of the Practice convertible into equity interests in the Practice,
or (c) commitments, options, rights or warrants to issue any such equity
interests in the Practice, to issue securities of the Practice convertible
into such equity interests, or to redeem any securities of the Practice. No
interests of the Practice shall have been issued or disposed of in violation
of the preemptive rights, rights of first refusal or similar rights of any of
the Practice's members/partners/shareholders. The Practice shall qualify to
do business as a foreign entity in any other state or jurisdiction by reason
of its business, properties or activities in or relating to such other state
or jurisdiction.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation,
Bylaws/Regulations and minutes of the Practice and all amendments thereto of
the Practice shall have been delivered to Pentegra and shall be in form and
substance reasonably satisfactory to Pentegra. The minute books of the
Practice shall contain all accurate minutes of the meetings of and consents
to actions taken without meetings of the members\managers/partners/board of
directors of the Practice since its formation. The books of account of the
Practice shall have been kept accurately in the ordinary course of business
and the revenues, expenses, assets and liabilities of the Practice shall have
been properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements
and other documents to be executed and delivered by it pursuant to this
Agreement, including without limitation, the Service Agreement and each
Employment Agreement or to be executed and delivered on the Closing Date, and
has taken all action required by law, its Organization/Partnership
Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to
authorize the execution, delivery and performance of such documents. The
Service Agreement, the Employment Agreement and the other agreements
contemplated hereby shall have been duly executed and delivered by the
Practice and constitute or will constitute the legal, valid and binding
obligations of the Practice enforceable against the Practice in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of the
Service Agreement, the Employment Agreements and the other agreements
contemplated hereby will not violate any provision of the organizational
documents of the Practice or any provisions of, or result in the acceleration
of, any obligation under any mortgage, lien, lease, agreement, rent,
instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any
material restrictions of any kind to which the Practice is subject, or result
in any lien or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and has filed with
the proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
<PAGE>
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND DENTIST.
Pentegra and Dentist agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, at its sole cost and expense,
shall promptly prepare and file with the Securities and Exchange Commission
("SEC") the Registration Statement on Form S-1 (or other appropriate Form)
to be filed by Pentegra in connection with its Initial Public Offering
(including the prospectus constituting a part thereof, the "Registration
Statement"). Pentegra, at its sole cost and expense, shall obtain all
necessary state securities laws or "Blue Sky" permits and approvals required
to carry out the transactions contemplated by this Agreement and the Dentist
shall furnish all information concerning Dentist as may be reasonable
requested in connection with any such action.
Dentist represents and warrants that none of the information or documents
supplied or to be supplied by it specifically for inclusion in the
Registration Statement, by exhibit or otherwise, will, at the time the
Registration Statement and each amendment or supplement thereto, if any,
becomes effective under the Securities Act of 1933, contain any untrue
statement of a material fact or omit to state any mateial fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Dentist shall be
entitled to review the Registration Statement and each amendment thereto, if
any, prior to the time each becomes effective under the Securities Act of
1933.
Dentist shall furnish Pentegra will all information concerning itself and
such other matters as may be reasonable requested by Pentegra in connection
with the preparation of the Registration Statement and each amendment or
supplement thereto, or any other statement, filing, notice or application
made by or on behalf of each such party or any of its subsidiaries to any
governmental entity in connection with the transactions contemplated by the
Other Agreements or this Agreement.
6.2 SALES TAX. Notwithstanding any provision herein to the contrary,
Pentegra hereby covenants and agrees to pay any and all sales and/or use
taxes due and owing as a result of the transactions contemplated by this
Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Dentist contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied
with all covenants and conditions required by this Agreement to be performed
and complied with by Dentist prior to the Closing
<PAGE>
Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of the Business or Assets shall have occurred since the Balance
Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of the Business and the Assets, the results of which shall be
satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service
Agreement"), in substantially the form attached hereto as EXHIBIT 7.7,
pursuant to which Pentegra will provide management services to the Practice.
Dentist shall have executed and delivered a Guaranty Agreement in
substantially the form attached as EXHIBIT 4.10 of the Service Agreement
pursuant to which Dentist shall, among other things, guaranty the obligations
of the Practice under the Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her
employment agreement and executed an employment agreement ("Employment
Agreement") with the Practice in form and substance attached hereto as
EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra.
7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary
government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables
or payables between Dentist and its affiliates relating to the Business or
Assets, and Dentist shall not have any liabilities relating to the Business,
including indebtedness, guaranties and capital leases, that are not set forth
on EXHIBIT 2.19.
7.12 INSURANCE. Dentist shall have named Pentegra as an additional
insured on its liability insurance program in accordance with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Dentist since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. The Registration Statement shall have become
effective under the Securities Act (the "Effective Date") 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. At or prior to the date that the Registration
Statement is declared effective by the SEC, Pentegra shall have received all
state securities and "Blue Sky" permits necessary to consummate the
transactions contemplated hereby. The Pentegra Common Stock shall have been
approved for listing on Nasdaq or other
<PAGE>
exchange selected by Pentegra, subject only to official notification of
issuance.
SECTION 8. DENTIST'S CONDITIONS PRECEDENT.
The obligations of Dentist hereunder are subject to fulfillment at or
prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pentegra contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly
executed in form satisfactory to Dentist and its counsel, referred to in
SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF DENTIST. Within five business days after requested by
Pentegra, Dentist shall deliver to Pentegra the following, all of which shall
be in a form reasonably satisfactory to counsel to Pentegra and shall be held
by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing,
pursuant to an escrow agreement or letter agreement in form and substance
mutually acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a bill of sale conveying the Assets to Pentegra;
(d) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(e) certificates of Dentist dated as of the Closing Date, (i) as to
the truth and correctness of the
<PAGE>
representations and warranties of Dentist contained herein; (ii) as to the
performance of and compliance by Dentist with all covenants contained herein;
and (iii) certifying that all conditions precedent of Dentist to the Closing
have been satisfied;
(f) an opinion of counsel to Dentist opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Dentist, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Pentegra;
(g) non-foreign affidavits executed by Dentist;
(h) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(i) an executed Registration Rights Agreement between Pentegra and
Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(j) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Dentist the following, all of which shall be in a form
reasonably satisfactory to counsel to Dentist and shall be held by Jackson &
Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to
an escrow agreement or letter agreement in form and substance mutually
acceptable to the parties hereto:
(a) the Acquisition Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Dentist;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement
<PAGE>
and the other documents and agreements to be executed pursuant hereto, the
good standing and authority of Pentegra, the enforceability of this Agreement
and the other agreements and documents to be executed in connection herewith,
and other matters reasonably requested by Dentist;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Dentist to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit attached hereto, any agreement executed pursuant hereto, and
any certificate executed and delivered by any party pursuant to the terms of
this Agreement, shall constitute representations and warranties of Dentist or
of Pentegra, as the case may be. All such representations and warranties,
and all representations and warranties expressly labeled as such in this
Agreement shall survive the date of this Agreement and the Closing Date for a
period of three (3) years following the Closing Date, except that (i) the
representations and warranties with respect to environmental and medical
waste laws and health care laws and matters shall survive for a period of
fifteen (15) years and tax representations shall survive until one year after
the expiration of the applicable statute of limitations. Each party
covenants with the other parties not to make any claim with respect to such
representations and warranties, against any party after the date on which
such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof,
unless such party has timely given the notice required in SECTION 10.2, 10.3
or 10.4 hereof, as the case may be. Each party hereby releases, acquits and
discharges the other party from any and all claims and demands, actions and
causes of action, damages, costs, expenses and rights of setoff with respect
to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable,
are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE
EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND
AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS,
DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR
<PAGE>
ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA
REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT
MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION
10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS,
SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND
EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR
WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER,
(B) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS PRIOR TO THE
CLOSING DATE,
(C) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS AND AFFILIATES (OTHER THAN PENTEGRA) OF STATE OR FEDERAL
LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION
ARISING OUT OF OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS
SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(D) TAXES (OTHER THAN SALES AND USE TAXES) OF DENTIST OR ANY OTHER
PERSON OR ENTITY RELATED TO OR AFFILIATED WITH DENTIST ARISING FROM OR AS A
RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(E) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION,
PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR
THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(F) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(G) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
<PAGE>
(H) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED
TO PENTEGRA OR ITS COUNSEL IN WRITING BY THE DENTIST SPECIFICALLY FOR
INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY
PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT
THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO
STATE THEREIN A MATERIAL FACT RELATING TO DENTIST REQUIRED TO BE STATED
THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the
defense of such action or proceeding, such Indemnified Person shall notify
Indemnitor thereof. If any such action or other proceeding shall be brought
against any Indemnified Person, Indemnitor shall, upon written notice given
within a reasonable time following receipt by Indemnitor of such notice from
Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.
Except with respect to the failure of Pentegra to satisfy the payment of the
Acquisition Consideration, the parties hereto hereby acknowledge and agree
that the indemnification rights of the parties under this Section 10 and
equitable remedies, including without limitation, injunctive relief,
represent the sole and exclusive remedies that the parties hereto have with
respect to the breach of any representation, warranty or covenant set forth
in this Agreement.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Dentist giving rise to
indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be
entitled to offset the amount of damages incurred by it as a result of such
breach of warranty, representation, covenant or agreement against any amounts
payable by Pentegra, including the amounts payable under the Service
Agreement. In the event of any breach of warranty, representation, covenant
or agreement by Pentegra giving rise to indemnification under Section 10.2 or
10.4 hereof, Dentist shall be
<PAGE>
entitled to offset the amount of damages actually incurred by it as a result
of such breach of a warranty, representation or covenant or agreement against
any amounts payable by Dentist or the Practice, including the amounts payable
under the Service Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Dentist
contained in this Agreement or in any certificate or other document executed
and delivered by Dentist pursuant to this Agreement is or becomes untrue or
breached in any material respect or if Dentist fails to comply in any
material respect with any covenant or agreement contained herein, and any
such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
(c) at any time by Dentist if any representation or warranty of Pentegra
contained in this Agreement or in any certificate or other document executed
and delivered by Pentegra pursuant to this Agreement is or becomes untrue or
breached in any material respect or if Pentegra fails to comply in any
material respect with any covenant or agreement contained herein and such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra or Dentist if the transaction contemplated hereby shall
not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Dentist, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares
of Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer
shall be treated as effective for any purpose or (b) engage in any
transaction, whether or not with respect to any shares of Pentegra Common
Stock or any interest therein, the intent or effect of which is to reduce the
risk of owning shares of Pentegra Common Stock. The certificates evidencing
the Pentegra Common Stock delivered to Dentist pursuant to the terms hereof
will bear a legend substantially in the form set forth below and containing
such other information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the
shares of Pentegra Common Stock to be delivered to Dentist pursuant to this
Agreement have not been and will not be registered
<PAGE>
under the Securities Act of 1933, and may not be resold without compliance
with the Securities Act of 1933, as amended or an exemption thereunder. The
Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement is
being acquired solely for its own account, for investment purposes only and
with no present intention of distributing, selling or otherwise disposing of
it in connection with a distribution. Dentist covenants, warrants and
represents that none of the shares of Pentegra Common Stock issued to it will
be offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable
provisions of the Securities Act, as amended, and the rules and regulations
of the Securities Exchange Commission and applicable state securities laws
and regulations. All certificates evidencing shares of Pentegra Common Stock
shall bear the following legend in addition to the legend referenced in
SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock
shall bear any legend required by the securities or blue sky laws of any
state where Dentist resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic
risk of an investment in Pentegra Common Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and has
such knowledge and experience in financial and business matters that they are
capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect its own interests in connection with
the acquisition of the Pentegra Common Stock. Dentist and its
representatives have had an adequate opportunity to ask questions and receive
answers from the officers of Pentegra concerning any and all matters relating
to the background and experience of the officers and directors of Pentegra,
the plans for the operations of the business of Pentegra, and any plans for
additional acquisitions and the like. Dentist and its representatives have
asked any and all questions in the nature described in the preceding sentence
and all questions have been answered to their satisfaction. Dentist is an
"accredited investors" as defined in Regulation D of the Securities Act of
1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes
and acknowledges that it had in the past, currently has, and in the future
may possibly have, access to certain confidential information of Pentegra
that is valuable, special and unique assets of Pentegra's businesses.
Dentist agrees that it will not disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or
reason whatsoever, unless (i) such information becomes available to or known
by the public generally through no fault of Dentist, (ii) disclosure is
required by law or the order of any governmental authority under color of
law, provided, that prior to disclosing any information pursuant to this
clause (ii), Dentist shall, if possible, give prior written notice thereof to
the other parties hereto, and provide such other parties hereto, at their
sole cost and expense, with the opportunity to contest such disclosure, (iii)
Dentist reasonably believes that such disclosure is required in connection
with the defense of a lawsuit against the disclosing party, or (iv) Dentist
is the sole and exclusive owner of such confidential information as a result
of the transactions contemplated hereunder or otherwise. In the event of a
breach or threatened breach by Dentist of the provisions of this SECTION 13,
Pentegra shall be entitled to an injunction restraining Dentist from
disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Pentegra from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. The obligations of the parties under this SECTION 13 shall
survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
<PAGE>
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement, together with the transactions contemplated by the Other
Agreement and the Initial Public Offering, will qualify as an exchange
meeting the requirements of Section 351 of the Code. The tax returns (and
schedules thereto) of Dentist and Pentegra shall be filed in a manner
consistent with such intention and Dentist and Pentegra shall each provide
the other with such tax information, reports, returns or schedules as may be
reasonably required to assist the other in so reporting the transactions
contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Dentist:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to Section 14.13, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Dentist for services rendered in
connection with negotiating and closing the transactions contemplated by this
Agreement or the documents to
<PAGE>
be executed in connection herewith, whether or not such costs or expenses are
incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Dentist.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one and the
same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Dentist, be relieved from its obligations
to Dentist under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Dentist, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with
<PAGE>
respect to the claims asserted in the Complaint. "Reasonable attorneys'
fees" are those reasonable attorneys' fees actually incurred in obtaining a
judgment in favor of the prevailing party.
14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes (other than sales and use taxes) levied upon
the Assets for the calendar year in which the Closing occurs. Such taxes
shall be estimated, apportioned and pro-rated among Dentist and Pentegra as
of the Closing Date, and the prorated amount due Pentegra shall be credited
to the cash portion of the Purchase Consideration. Upon payment by Pentegra
of such taxes actually assessed and paid on the Assets, Pentegra shall
calculate the apportionment of such taxes and shall pay Dentist or may demand
from Dentist, and Dentist agrees to pay, the amount necessary to correct the
estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Dentist (hereinafter referred to as a "Party"), whether made before or after
the institution of any legal proceeding, any dispute among the parties hereto
in any way arising out of, related to, or in connection with this Agreement
(hereinafter a "Dispute"), shall be resolved by binding arbitration in
accordance with the terms of this Section (hereinafter the "Arbitration
Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or foreclosing upon any
personal property in which there has been granted a security interest or lien
by a Party in the Documents. In Disputes involving indebtedness or other
monetary obligations, each Party agrees that the other Party may proceed
against all liable persons, jointly and severally against one or more of
them, without impairing rights against other liable persons. Nor shall a
Party be required to join the principal obligor or any other liable persons
(e.g., sureties or guarantors) in any proceeding against a particular person.
A Party may release or settle with one or more liable persons as the Party
deems fit without releasing or impairing rights to proceed against any
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration
<PAGE>
Program. The arbitrators may also grant such ancillary relief as is
necessary to make effective the award. In all arbitration proceedings the
arbitrators shall make specific and written findings of fact and conclusions
of law. In all arbitration proceedings in which the amount in controversy
exceeds $100,000.00, in the aggregate, the Parties shall have in addition to
the statutory right to seek vacation or modification of any award pursuant to
applicable law, the right to seek vacation or modification of any award that
is based in whole, or in part, on an incorrect or erroneous ruling of law by
appeal to an appropriate court having jurisdiction; provided, however, that
any such application for vacation or modification of an award based on an
incorrect ruling of law must be filed in a court having jurisdiction over the
Dispute within 15 days from the date the award in rendered. The arbitrators'
findings of fact shall be binding on all Parties and shall not be subject to
further review except as otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoeniz,
Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or by
applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
--------------------------------
Its: Senior Vice President
/s/ James P. Allen
------------------------------------
James P. Allen, D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 [intentionally omitted]
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
Walter J. Anderson, D.D.S., Donald H. Plotkin, D.D.S., William H. Swilley,
D.D.S., William A. Cerny, D.D.S. and Graham A. Satchell, D.D.S., Inc. dba
Anderson Dental Group
and
Walter J. Anderson, D.D.S.,
Donald H. Plotkin, D.D.S.,
William A. Cerny, D.D.S.,
Brian M. Ellis, D.D.S.,
Afshan Kaviani, D.D.S.
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. TERMS OF THE REORGANIZATION
1.2 MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 CERTIFICATE OF INCORPORATION; BYLAWS . . . . . . . . . . . . . . . . . 2
1.7 SUBSEQUENT ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING . . . . . . . . . . . . . . . . . . 3
2.2 POWER AND AUTHORITY FOR TRANSACTIONS . . . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. . . . . . . . . . . 3
2.4 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES. . . . . . . . . . . . . . . . . . . . . 3
CORPORATE RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
COMPANY'S FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . 4
2.8 LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. . . . . . . . . . . . . . . . . 4
2.11 INVENTORIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
INTELLECTUAL PROPERTY RIGHTS; NAMES. . . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES . . . . . . . . 4
2.14 LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.15 CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.17 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL. . . . . . . . . . . . . . . . . . . . 8
THIRD PARTY PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS . . . . . . . . 9
2.28 PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING . . . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS. . . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. . . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.6 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . 11
4.11 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . 12
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . 13
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . 13
Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . 13
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . 13
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . 14
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . 14
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . 14
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . 14
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . 14
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . 14
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . 14
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . 14
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . 15
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . 15
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF COMPANY AND SIGNATORY SHAREHOLDERS. . . . . . . . . . . . 15
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . 17
10.3 INDEMNIFICATION BY COMPANY AND SIGNATORY SHAREHOLDERS . . . . . . . . 18
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . 19
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . 20
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . 20
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . 20
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . 22
14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . 23
14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . 23
14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . 23
14.12 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 23
14.13 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.14 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.15 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.16 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and
executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra"), Walter J. Anderson, D.D.S., Donald H.
Plotkin, D.D.S., William H. Swilley, D.D.S., William A. Cerny, D.D.S. and Graham
A. Satchell, D.D.S., Inc. dba Anderson Dental Group ("Company") and Walter
Anderson, D.D.S., Donald H. Plotkin, D.D.S., William A. Cerny, D.D.S., Brian
Ellis, D.D.S., and Afshan Kaviani, D.D.S. (all referred to herein jointly
and severally in the singular as "Signatory Shareholder" or "Signatory
Shareholders").
WITNESSETH:
<PAGE>
WHEREAS, Company operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, the Boards of Directors and the signatory shareholders of the
Company and Pentegra have determined that a reorganization between each of
them is in the best interests of their respective companies;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Company, the "Target Companies")
and simultaneously with the closing of the reorganization contemplated
herein, intends to consummate its initial public offering ("Initial Public
Offering") of shares of its common stock, par value $.01 per share ("Pentegra
Common Stock");
WHEREAS, it is intended for Federal income tax purposes that the
reorganization contemplated by this Agreement shall qualify as an
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering. .
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE REORGANIZATION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date". Nothing herein will require that any of
the parties to this Agreement shall be required to be present in person at
the closing.
1.2 MERGER. Subject to and upon the terms and conditions contained
herein, on the Closing Date, the Company shall be merged with and into
Pentegra (or its designated affiliate, in which case, the references herein
to Pentegra shall be to such designated affiliate and its shares of common
stock) in accordance with this Agreement and the separate corporate existence
of the Company shall thereupon cease ("Merger"). Pentegra shall be the
surviving corporation in the Merger ("Surviving Corporation") and shall
continue to be governed by the laws of the State of Delaware and the separate
corporate existence of Pentegra with all rights, privileges, powers,
immunities and purposes shall continue unaffected by the Merger, provided
that all corporate laws of the State of Texas have been complied with by
Company and Pentegra in the termination of the Company. The Merger shall
have the effects specified in the Delaware General Corporation Law and the
Business Corporation Law. If all the conditions to the Merger set forth
herein shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated in accordance herewith, the parties
hereto shall within their power and authority cause to be properly executed
and filed on the Closing Date Certificates of Merger for the Company meeting
the applicable legal requirements. The Mergers shall become effective on the
Closing Date or the filing of such documents, in accordance with applicable
law, or at such later time as the parties hereto have agreed upon and
designated in such merger filings.
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of
Incorporation and Bylaws of Pentegra shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation until duly amended in
accordance with their terms.
<PAGE>
1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra
immediately prior to the effective date of the Merger shall be the directors
of the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal
in accordance with the Surviving Corporation's Certificate of Incorporation
and Bylaws. The persons who are officers of Pentegra immediately prior to
the effective date of the Merger shall be the officers of the Surviving
Corporation and shall hold their respective offices until their successors
have been duly elected or appointed and qualified or until their earlier
death, resignation or removal.
1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and
without any action on the part of the holder thereof except for the specific
perfomance of conditions of the Merger, all shares of the Signatory
Shareholders of the Company's common stock issued and outstanding on the
effective date of the Merger shall cease to be outstanding and shall be
cancelled and retired and shall cease to exist, and each holder of a
certificate of representing shares of Company common stock shall thereafter
cease to have any rights with respect to such shares except the right to
receive the consideration set forth on ANNEX I attached hereto (the "Merger
Consideration"). Each share of common stock of the Company held in treasury
at the effective date of the Merger shall cease to be outstanding and shall
be cancelled and retired without payment of any consideration therefor. On
the effective date of the Merger, each share of Pentegra Common Stock issued
and outstanding shall, by virtue of the Mergers, and without any action on
the part of the holder thereof except for the specific performance of
conditions of the Merger, continue unchanged and remain outstanding as a
share of validly issued, fully paid and nonassessable share of Surviving
Corporation common stock.
1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the
Merger, the Signatory Shareholders, as the holders of a certificate or
certificates representing shares of Company common stock shall, upon
surrender of such certificate or certificates, or evidence of such
certificates, receive the Merger Consideration, and until the certificate or
certificates or certification of Company common stock shall have been
surrendered by the Shareholder and replaced by a certificate or certificates
representing Pentegra Common Stock (as set forth on ANNEX I), the certificate
or certificates of Company common stock shall, for all purposes be deemed to
evidence ownership of the number of shares of Pentegra Common Stock
determined in accordance with the provisions of ANNEX I. All shares of
Pentegra Common Stock issuable to the Signatory Shareholders in the Merger
shall be deemed for all purposes to have been issued by Pentegra on the
Closing Date. The Signatory Shareholders shall deliver to Pentegra at
Closing the certificate or certificates or certification representing the
Company common stock owned by them, duly endorsed in blank by the
Shareholders, or accompanied by duly executed blank stock powers, and with
all necessary transfer tax and other revenue stamps, acquired at Pentegra's
expense, affixed and cancelled.
1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement, the
Company and Shareholders shall execute and deliver all such deeds, bills of
sale, assignments and assurances and take and do all such other actions and
things as may be necessary or desirable and within their power and authority
to vest, perfect or confirm any and all right, title and interest in, to and
under the Assets in Pentegra or otherwise to carry out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional
corporation or association, as applicable, duly organized, validly existing
and in good standing under the laws of the State of Texas. Company has all
necessary corporate powers to own all of its assets and to carry on its
business as such business is now being conducted. Company does not own
stock in or control, directly, any other corporation, association or business
organization, nor is Company a party to any joint venture or partnership,
except the stock accounts described on
<PAGE>
EXHIBIT 4.16. The Signatory Shareholders are the majority shareholders of
the Company and the shareholders of the Company are set forth on EXHIBIT 2.1
and own all outstanding shares of capital stock free of all security
interests, claims, encumbrances and liens. Each share of Company's common
stock has been legally and validly issued and fully paid and nonassessable.
No shares of capital stock of Company are owned by Company in treasury. There
are no outstanding (a) bonds, debentures, notes or other obligations the
holders of which have the right to vote with the stockholders of Company on
any matter, (b) securities of Company convertible into equity interests in
Company, or (c) commitments, options, rights or warrants to issue any such
equity interests in Company, to issue securities of Company convertible into
such equity interests, or to redeem any securities of Company. No shares of
capital stock of the Company have been issued or disposed of in violation of
the preemptive rights or rights of first refusal of Company's shareholders.
Company is not required to do business as a foreign corporation in any other
state or jurisdiction by reason of its business, properties or activities in
or relating to such other state or jurisdiction. Company does not have any
assets, employees or offices in any state other than the state set forth in
the first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate
power to execute, deliver and perform this Agreement and all agreements and
other documents executed and delivered by it pursuant to this Agreement or to
be executed and delivered on the Closing Date, and has taken all action
within its power and authority required by law, its Articles or Certificate
of Incorporation, its Bylaws or otherwise, to authorize the execution,
delivery and performance of this Agreement and such related documents. Each
Shareholder has the legal capacity to enter into and perform this Agreement
and the other agreements to be executed and delivered in connection herewith.
Company has obtained the approval of the shareholders of the Company owning
the voting stock of the Company to the consummation of the transactions
contemplated herein. This Agreement and all agreements and documents executed
and delivered in connection herewith have been, or will be as of the Closing
Date, duly executed and delivered by Company and Signatory Shareholders, as
appropriate, and constitute or will constitute the legal, valid and binding
obligations of Company and Signatory Shareholders, enforceable against
Company and Signatory Shareholders in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies. To the best of Company and Signatory Shareholders knowledge the
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, subject to the receipt of consents described on
EXHIBIT 2.4, the consummation of the actions contemplated hereby will not,
violate any provision of the Articles or Certificate of Incorporation or
Bylaws of Company or any provisions of, or result in the acceleration of, any
obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Company or any
Shareholder is a party or by which Company or any Shareholder is bound, or
violate any material restrictions of any kind to which Company is subject, or
result in any lien or encumbrance on any of Company's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All material
building or other permits, certificates of occupancy, concessions, grants,
franchises, licenses, certificates of need and other governmental
authorizations and approvals required for the conduct of the Business or the
use of the Assets, or waivers thereof, have been duly obtained and are in
full force and effect and are described on EXHIBIT 2.3. There are no
proceedings pending or, to the knowledge of Company and Shareholders,
threatened, which may result in the revocation, cancellation or suspension,
or any adverse modification, of any such licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Company or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. [This section has intentionally
been omitted.]
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Company and all
amendments thereto have been delivered to Pentegra. The minute books of
Company contain accurate minutes of meetings of and consents to actions taken
without meetings of the Board of Directors and stockholders of Company since
its formation. The books of account of Company have been kept accurately in
the ordinary course of business and the revenues, expenses, assets and
liabilities of Company have been properly
<PAGE>
recorded in such books.
2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any
related unaudited statements of income, retained earnings, schedule of
accounts receivable, accounts payable and accrued liabilities, and cash flows
for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Company as of
the dates and for the periods indicated and reflect all fixed and contingent
liabilities of Company.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Company or any Shareholder leases, as lessor or lessee,
real or personal property used in operating the Business, related to the
Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and
enforceable in accordance with their respective terms, and there is not under
any such lease any existing default by Company, as lessor or lessee, or any
condition or event of which any Shareholder or Company has knowledge which
with notice or lapse of time, or both, would constitute a default, in respect
of which Company or Shareholders have not taken adequate steps to cure such
default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Company and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances
set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to the Closing Date and evidence
of such releases of liens and claims shall be provided to Pentegra on the
Closing Date and the Assets shall not be used to satisfy such liens, claims
or encumbrances. Pentegra acknowledges that it has acquired the assets
"where and as is" relying solely upon Pentegra's own examination.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Company, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Company has no right, title or interest in or to patents, patent
rights, corporate names, manufacturing processes, trade names, trademarks,
service marks, inventions, specialized treatment protocols, copyrights,
formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a
listing of all names of all predecessor companies of Company, including the
names of any entities from whom Company previously acquired significant
assets. Except for off-the-shelf software licenses and except as set forth
on EXHIBIT 2.12, Company is not a licensee in respect of any patents,
trademarks, service marks, trade names, copyrights or applications therefor,
or manufacturing processes, formulas or trade secrets or similar items and no
such licenses are necessary for the conduct of the Business or the use of the
Assets. No claim is pending or has been made to the effect that the Assets
or the present or past operations of Company in connection with the Assets or
Business infringe upon or conflict with the asserted rights of others to any
patents, patent rights, manufacturing processes, trade names, trademarks,
service marks, inventions, licenses, specialized treatment protocols,
copyrights, formulas, know-how and trade secrets. Company has the sole and
exclusive right to use all Assets constituting proprietary rights without
infringing or violating the rights of any third parties and no consents of
any third parties are required for the use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the name of each director and officer of Company
and the offices held by each, (b) the most recent payroll report of Company,
showing all current employees of Company and their current levels of
compensation, (c) promised increases in compensation of employees of Company
that have not yet been effected, (d) oral or written employment agreements,
consulting
<PAGE>
agreements or independent contractor agreements (and all amendments thereto)
to which Company is a party, copies of which have been delivered to Pentegra,
and (e) all employee manuals, materials, policies, procedures and
work-related rules, copies of which have been delivered to Pentegra. Company
is in compliance with all applicable laws, rules, regulations and ordinances
respecting employment and employment practices. Company has not engaged in
any unfair labor practice. There are no unfair labor practices charges or
complaints pending or threatened against Company, and Company has never been
a party to any agreement with any union, labor organization or collective
bargaining unit.
2.14 LEGAL PROCEEDINGS. Except as set forth on Exhibit 2.16, neither any
Shareholder, Company nor the Business nor any of the Assets is subject to any
pending, nor does Company or any Shareholder have knowledge of any
threatened, litigation, governmental investigation, condemnation or other
proceeding against or relating to or affecting Company, any Shareholder, the
Business, the Assets or the transactions contemplated by this Agreement, and,
to the knowledge of Company and Shareholders, no basis for any such action
exists, nor is there any legal impediment of which Company or any Shareholder
has knowledge to the continued operation of its business or the use of the
Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Company has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Company ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted or may be made
by any party thereto. Except as indicated on such Exhibits, there is not
under any such Contract any existing default by Company or any Shareholder,
or any condition or event of which Company or any Shareholder has knowledge
which with notice or lapse of time, or both, would constitute a default.
Company and Shareholders have no knowledge of any default by any other party
to such Contracts. Company and Shareholders have not received notice of the
intention of any party to any Contract to cancel or terminate any Contract
and have no reason to believe that any amendment or change to any Contract is
contemplated by any party thereto. Other than those contracts, obligations
and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company
are not a party to any material written or oral agreement contract, lease or
arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
<PAGE>
(j) Financial or similar contracts or agreements with patients of
the Company or Shareholders, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Company on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company
has not, since the Balance Sheet Date:
(l) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement, other than in the course of business;
(m) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(n) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(o) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
(p) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(q) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Company since the Balance Sheet
Date;
(r) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(s) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(t) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(u) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(v) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(w) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(x) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties,
assets or business or the Business or the Assets, or experienced any other
material adverse change in its financial condition, assets, prospects,
liabilities or business;
<PAGE>
(y) Declared or paid a distribution, payment or dividend of any
kind on the capital stock of Company;
(z) Repurchased, approved any repurchase or agreed to repurchase
any of Company's capital stock; or
(aa) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Company has filed all tax returns (including tax reports
and other statements) required to have been filed by it or have been properly
extended, and has paid all taxes (including any interest, penalty or
additions thereto) required to have been paid by it. All such tax returns
are complete and accurate to the Company's best knowledge in all respects and
properly reflect the relevant taxes for the periods covered thereby.
Company has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Company. There are no audits relating
to taxes of Company pending or in process or, to the knowledge of Company,
threatened. Company is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency. There are no liens or encumbrances relating to taxes on or
threatened against any of the assets of Company. Company has withheld and
paid all taxes required by law to have been withheld and paid by it. Neither
Company nor any predecessor of Company is or has been a party to any tax
allocation or sharing agreement or a member of an affiliated group of
corporations filing a consolidated Federal income tax return. Company has
delivered to Pentegra correct and complete copies of Company's three most
recently filed annual state, local and Federal income tax returns, together
with all examination reports and statements of deficiencies assessed against
or agreed to by Company during the three calendar year period preceding the
date of this Agreement. Company has neither made any payments, is obligated
to make any payments, or is a party to any agreement that under any
circumstance could obligate it to make any payments that will not be
deductible under Code section 280G.
(b) No Shareholder presently intends to dispose of any of the shares of
Pentegra Common Stock to be received hereunder nor is a party to any plan,
arrangement or agreement for the disposition of such shares. Nothing
contained herein shall prohibit Shareholders from selling such shares of
Pentegra Common Stock after the designated holding period and in accordance
with SECTION 12.1 hereof, or other applicable law.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated
by this Agreement which may be now or hereafter asserted against Pentegra,
Company or Company's shareholders resulting from any action taken by Company
or any Shareholder or their respective agents or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Company did not have, as of the Balance Sheet
Date, and has not incurred since that date and will not have incurred as of
the Closing Date, any material liabilities or obligations of any nature,
whether accrued, absolute, contingent or otherwise, and whether due or to
become due, other than those incurred in the ordinary course of business or
as set forth on EXHIBIT 2.16. Company and Shareholders do not know, or have
reasonable grounds to know, of any basis for the assertion against Company or
any Shareholder as of the Balance Sheet Date, of any claim or liability of
any nature in any amount not fully reflected or reserved against on the
Balance Sheet, or of any claim or liability of any nature arising since that
date other than those incurred in the ordinary course of business or
contemplated by this Agreement. All indebtedness of Company (including
without limitation, indebtedness for borrowed money, guaranties and capital
lease obligations) is described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed
professional of Company carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the
industry. Valid and enforceable policies in such amounts are outstanding and
duly in force and will remain duly in force through the Closing Date. All
such policies are described in EXHIBIT 2.20 attached hereto and true and
correct copies have been delivered to Pentegra. Neither Shareholders nor
Company have not received notice or other communication from the issuer of
any such insurance policy cancelling or amending such policy or threatening
to do so. Neither Company, nor any Shareholder nor any licensed professional
employee of Company has any outstanding claims, settlements or premiums owed
against any insurance policy.
<PAGE>
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Company has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company
Plan," and collectively "Company Plans") have been operated and administered
in all material respects in accordance with all applicable laws, rules and
regulations, including without limitation, ERISA, the Internal Revenue Code
of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment
Act of 1967, as amended, and the related rules and regulations adopted by
those Federal agencies responsible for the administration of such laws. To
the best of the Company and Signatory Shareholder's knowledge, no act or
failure to act by Company has resulted in a "prohibited transaction" (as
defined in ERISA) with respect to the Company Plans. No "reportable event"
(as defined in ERISA) has occurred with respect to any of the Company Plans.
Company has not previously made, is not currently making, and is not
obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Company Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at least equal to the
value of plan liabilities or (ii) the value of plan liabilities in excess of
plan assets is disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Company, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and
Company's licensed professional employees, and the conduct of the Business
and use of the Assets, have complied with all applicable laws, rules,
regulations and licensing requirements, including, without limitation, the
Federal Environmental Protection Act, the Occupational Safety and Health Act,
the Americans with Disabilities Act and any environmental laws and medical
waste laws, and there exist no violations by Company, any Shareholder or any
licensed professional employee of Company of any Federal, state or local law
or regulation. Company and Shareholders have not received any notice of a
violation of any Federal, state and local laws, regulations and ordinances
relating to the operations of the Business and Assets and no notice of any
pending inspection or violation of any such law, regulation or ordinance has
been received by Company that has not been properly and adequately converted.
2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed
professional employee or independent contractor of Company has timely filed
all claims or other reports required to be filed with respect to the purchase
of services by third-party payors, and all such claims or reports are
complete and accurate, and has no liability to any payor with respect
thereto. There are no pending appeals, overpayment determinations,
adjustments, challenges, audit, litigation or notices of intent to open
Medicare or Medicaid claim determinations or other reports required to be
filed by Company, any Shareholder and each licensed professional employee of
Company. Neither Company, nor any Shareholder, nor any licensed professional
employee of Company has been convicted of, or pled guilty or nolo contendere
to, patient abuse or negligence, or any other Medicare or Medicaid program
related offense and none has committed any offense which may serve as the
basis for suspension or exclusion from the Medicare and Medicaid programs or
any other third party payor program. With respect to payors, Company,
Shareholders and Company's licensed professional employees have not (a)
knowingly and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
<PAGE>
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company
or Shareholders in this Agreement, and no Exhibit or certificate issued or
executed by, or information furnished by, officers or directors of Company or
any Shareholder and furnished or to be furnished to Pentegra pursuant hereto,
or in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make the statements or facts contained
therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Company has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Company (or their respective spouses,
children or affiliates) owns directly or indirectly, on an individual or
joint basis, any interest in, has a compensation or other financial
arrangement with, or serves as an officer or director of, any customer or
supplier or competitor of Company or any organization that has a material
contract or arrangement with Company, except as noted in Exhibit 2.15.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Company's services which
accounted for more than 10% of revenues of Company in the preceding fiscal
year. Company has good relations with all such payors and other material
payors of Company and none of such payors has notified Company that it
intends to discontinue its relationship with Company or to deny any claims
submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Company and Shareholders as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Pentegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not
<PAGE>
have a material adverse effect upon Pentegra. Other than as would not have a
material adverse effect, there are no proceedings pending or, to the
knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has knowledge to the continued operation of its business or the use
of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the reorganization contemplated
hereby will be as of the Closing Date duly and validly authorized by all
necessary corporate action on the part of Pentegra. The Pentegra Common
Stock to be issued in connection with the reorganization contemplated hereby,
when issued in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Company or any
Shareholder pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, agree that between the
date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Signatory
Shareholders shall use their best efforts to cause the consummation of the
transactions contemplated hereby in accordance with their terms and
conditions. Company and Signatory Shareholders agree to complete the Exhibits
hereto to be provided by them in form and substance satisfactory to both
Company and Pentegra.
4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the
Business and use the Assets in the ordinary course. Company and Shareholders
shall not enter into any lease, contract, indebtedness, commitment, purchase
or sale or acquire or dispose of any capital asset relating to the Business
or the Assets except in the ordinary course of business. Company and
Shareholders shall use their best efforts to preserve the Business and Assets
intact and shall not take any action that would have an adverse effect on the
Business or Assets. Company and Shareholders shall use their best efforts to
preserve intact the relationships with payors, customers, suppliers, patients
and others having significant business relations with Company. Company and
Shareholders shall collect its receivables and pay its trade payables in the
ordinary course of business. Company and Shareholder shall not introduce any
new method of management, operations or accounting.
<PAGE>
4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra
and its authorized representatives access to, and make available for
inspection, all of the assets and business of Company, the Business and the
Assets, including employees, customers and suppliers and permit Pentegra and
its authorized representatives to inspect and make copies of all documents,
records and information with respect to the business or assets of Company,
the Business or the Assets as Pentegra or its representatives may request.
Company and Shareholders shall promptly notify Pentegra in writing of (a) any
notice or communication relating to a default or event that, with notice or
lapse of time or both, could become a default, under any contract, commitment
or obligation to which Company is a party or relating to the Business or the
Assets, and (b) any adverse change in Company's or the Business' financial
condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and
Shareholders shall use their best efforts to secure all necessary approvals
and consents of third parties to the consummation of the transactions
contemplated hereby, including consents described on EXHIBIT 2.4. Company
and Shareholders shall use their best efforts to obtain all licenses,
permits, approvals or other authorizations required under any law, rule,
regulation, or otherwise to provide the services of the Practice contemplated
by the Service Agreement and to conduct the intended business of the Practice
and operate the Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance
with the provisions hereof, Company and Shareholders shall not, and shall use
its best efforts to cause Company's employees, agents and representatives not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or
the making or implementation of any proposal or offer, including without
limitation, any proposal or offer to any Shareholder, with respect to a
merger, acquisition, consolidation or similar transaction involving, or the
purchase of all or any significant portion of the assets or any equity
securities of Company or engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person relating to such proposal or offer, and Company and Shareholders will
immediately cease any such activities, discussions or negotiations heretofore
conducted with respect to any of the foregoing. Company and Shareholders
shall immediately notify Pentegra if any such inquiries or proposals are
received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Company or any entity might have any liability whatsoever
arising from any insurance, pension plan, employment tax or similar
liability of Company to any employee or other person or entity (including,
without limitation, any Company Plan and any liability under employment
contracts with Company) allocable to services performed prior to the Closing
Date. Company and Shareholders acknowledge that the purpose and intent of
this covenant is to assure that Pentegra shall have no unfunded liability
whatsoever at any time after the Closing Date with respect to any of
Company's employees or similar persons or entities, including, without
limitation, any Company Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Company shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash
compensation of any Shareholder (other than in the ordinary course of
business) or other employee or an independent contractor of Company, adopt,
amend or terminate any compensation plan, employment agreement, independent
contractor agreement, employee policies and procedures or employee benefit
plan, take any action that could deplete the assets of any employee benefit,
or fail to pay any premium or contribution due or file any report with
respect to any employee benefit plan, or take any other actions with respect
to its employees or employee matters which might have an adverse effect upon
Company, its business, assets or prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Company, nor will any repurchase of
any of Company's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders
shall use their best efforts to take, or cause to be taken, all actions
necessary to effect the reorganization contemplated hereby under applicable
law.
<PAGE>
4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not
change in any material respect the tax or financial accounting methods or
practices followed by Company (including any material change in any
assumption underlying, or any method of calculating, any bad debt,
contingency or other reserve), except as may be required by law or generally
accepted accounting principles. Company and Shareholders will duly,
accurately and timely (without regard to any extensions of time) file all
returns, information statements and other documents relating to taxes of
Company required to be filed by it, and pay all taxes required to be paid by
it, on or before the Closing Date.
4.11 [INTENTIONALLY OMITTED]
4.12 LEASE. If Company leases any of its premises from any Shareholder
or other affiliate of Company or any shareholder of Company, Pentegra shall
have entered into a building lease (the "Building Lease") with the owner of
such premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, (i) a five year
initial term plus three five-year renewal options, (ii) a lease rate equal to
the fair market value lease rate, as agreed to by Pentegra, and (iii) such
other provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with
all requests made by Pentegra for the purpose of allowing Pentegra to hire
those non-dentist employees of Company employed by the Company as of the
Closing Date, with such employment to be effective as of the Closing Date.
Notwithstanding the above, Company and Shareholders shall remain liable under
any Company Plans for any claims incurred by any employees or their spouses
or dependents, and for all compensation, bonuses, benefits and other such
items and other liabilities related to Company's employees incurred by
Company prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all
employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall
be treated as "leased employees" (as defined in Code Section 414(n)) of
Company and shall be treated as Clinic employees for purposes of eligibility
and participation in Company Plans.
4.15 INSURANCE. Company shall agree to have and shall assist Pentegra
and its affiliates to be named as an additional insured on its liability
insurance programs, effective as of the Closing Date.
4.16 FORMATION OF THE PRACTICE. The Signatory Shareholders shall have
authorized to be formed a limited liability company, partnership or other
legal entity (the "Practice"), which shall be incorporated, controlled and
have as its sole initial member/shareholder/partner - Walter J. Anderson,
D.D.S., for the purpose of practicing dentistry and other services ancillary
thereto, entering into the Service Agreement. The Practice shall be duly
organized, in existing and in good standing under the laws of the State in
which the practice of dentistry is conducted by the Shareholders and the
Practice. The Practice shall have all necessary power to own all of its
assets and to carry on its business as such business is now being conducted.
Walter J. Anderson, D.D.S. shall be the sole member/shareholder/partner of
the Practice and own all such interests free of all security interests,
claims, encumbrances and liens. Each interest in the Practice shall be
legally and validly issued and fully paid and nonassessable. There shall be
no outstanding (a) bonds, debentures, notes or other obligations the holders
of which have the right to vote with the members/partners/shareholders of the
Practice on any matter, (b) securities of the Practice convertible into
equity interests in the Practice, or (c) commitments, options, rights or
warrants to issue any such equity interests in the Practice, to issue
securities of the Practice convertible into such equity interests, or to
redeem any securities of the Practice. No interests of the Practice shall
have been issued or disposed of in violation of the preemptive rights, rights
of first refusal or similar rights of any of the Practice's
members/partners/shareholders. The Company shall have transferred the
Excluded Assets set forth on EXHIBIT 4.16 to the Practice and shall have
caused the Practice to assume the Excluded Liabilities set forth on EXHIBIT
4.16 in exchange for equity interest in the Practice, and the Company shall
have distributed such equity interest in the Practice to Walter J. Anderson,
D.D.S.
<PAGE>
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation,
Bylaws/Regulations and minutes of the Practice and all amendments thereto of
the Practice shall have been delivered to Pentegra. The minute books of the
Practice shall contain all accurate minutes of the meetings of and consents
to actions taken without meetings of the members\managers/partners/board of
directors of the Practice since its formation. The books of account of the
Practice shall have been kept accurately in the ordinary course of business
and the revenues, expenses, assets and liabilities of the Practice shall have
been properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements
and other documents to be executed and delivered by it pursuant to this
Agreement, including without limitation, the Service Agreement and each
Employment Agreement to be executed and delivered on the Closing Date, and
has taken or will take all action required by law, its
Organization/Partnership Agreement/Articles of Incorporation, its
Bylaws/Regulations or otherwise, to authorize the execution, delivery and
performance of such mutually agreeable documents. The Service Agreement, the
Employment Agreement and the other agreements contemplated hereby shall have
been duly executed and delivered by the Practice on the Closing Date and
constitute or will constitute the legal, valid and binding obligations of the
Practice enforceable against the Practice in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally or the availability of
equitable remedies. The execution and delivery of the Service Agreement, the
Employment Agreements and the other agreements contemplated hereby will not
violate any provision of the organizational documents of the Practice or any
provisions of, or result in the acceleration of, any obligation under any
mortgage, lien, lease, agreement, rent, instrument, order, arbitration award,
judgment or decree to which the Practice is a party or by which the Practice
is bound, or violate any material restrictions of any kind to which the
Practice is subject, or result in any lien or encumbrance on any of the
Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and have filed with
the proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra and Company agree to
complete the Exhibits hereto to be provided by both parties.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS.
Pentegra, Shareholders and Company agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall
cooperate to promptly prepare and file with the Securities Exchange
Commission ("SEC") the Registration Statement on Form S-1 (or other
appropriate Form) to be filed by Pentegra in connection with its Initial
Public Offering (including the prospectus constituting a part thereof, the
"Registration Statement"). Pentegra shall obtain all necessary state
securities laws or
<PAGE>
"Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Agreement and the Company and Shareholders shall furnish
all information concerning Company and Signatory Shareholders as may be
reasonable requested in connection with any such action.
Company and Shareholder represent and warrant that none of the
information or documents supplied or to be supplied by it specifically for
inclusion in the Registration Statement, by exhibit or otherwise, will, at
the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act of 1933, 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, in
light of the circumstances under which they were made, not misleading.
Company and Shareholders shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.
Company and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by
Pentegra in connection with the preparation of the Registration Statement and
each amendment or supplement thereto, or any other statement, filing, notice
or application made by or on behalf of each such party or any of its
subsidiaries to any governmental entity in connection with the transactions
contemplated by the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Company and Shareholders contained herein shall have been true and correct
in all respects when initially made and shall be true and correct in all
respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Company and Shareholders prior
to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Company shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Company, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a mutually agreeable Service Agreement (the
"Service Agreement"), which may be in the form attached hereto as EXHIBIT
7.7, and otherwise satisfactory to Company and Pentegra, pursuant to which
Pentegra will provide management services to the Practice. Each
member/shareholder/partner of the Practice shall have executed and delivered
a mutually agreeable Guaranty Agreement which may be in the form attached as
EXHIBIT 4.10, and otherwise satisfactory to Company and Pentegra of the
Service Agreement pursuant to which Shareholder shall, among other things,
guaranty the obligations of the Practice under the Service Agreement.
<PAGE>
7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, or assigned
to the Practice, each employment agreement between the Company and each
shareholder of Company, and Walter Anderson, D.D.S. and any shareholder for
which the employment agreement between the Company and such shareholder is
terminated rather than assigned to the Practice, shall have executed a mutually
agreeable employment agreement ("Employment Agreement") with the Practice which
may be in the form attached hereto as EXHIBIT 7.8 and otherwise satisfactory to
Company and Pentegra.
7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have
obtained all necessary government and other third-party approvals and
consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables
or payables between Company and its shareholders or affiliates and Company
shall not have any liabilities, including indebtedness, guaranties and
capital leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an
additional insured on their liability insurance program in accordance with
SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Company since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Company and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pentegra contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Company shall have received all documents, duly
executed in form satisfactory to Company and its counsel, referred to in
SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration
<PAGE>
Statement is declared effective by the SEC, Pentegra shall have received all
state securities and "Blue Sky" permits necessary to consummate the
transactions contemplated hereby. The Pentegra Common Stock shall have been
approved for listing on Nasdaq or other exchange selected by Pentegra,
subject only to official notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF COMPANY AND SIGNATORY SHAREHOLDERS. On or before the
Closing Date, Company and Signatory Shareholders shall deliver to Pentegra
the following, all of which shall be in a form satisfactory to counsel to
Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra)
in escrow pending Closing, pursuant to an escrow agreement or letter
agreement in form and substance mutually acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of Company
authorizing the execution, delivery and performance of this Agreement, the
Service Agreement, the Employment Agreements and all related documents and
agreements each certified by the Secretary as being true and correct copies
of the original thereof;
(d) executed merger certificate and/or plan as required by
applicable state law;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra and the original stock certificates
together with blank stock powers representing the outstanding shares of
Company common stock;
(f) certificates or evidence of certification of the Signatory
Shareholders and a duly authorized officer of Company dated as of the Closing
Date, (i) as to the truth and correctness of the representations and
warranties of Company and Signatory Shareholder contained herein; (ii) as to
the performance of and compliance by Company and Signatory Shareholder with
all covenants contained herein; and (iii) certifying that all conditions
precedent of Company and Signatory Shareholders to the Closing have been
satisfied;
(g) a certificate of the Secretary of Company certifying as to the
incumbency of the directors and officers of Company and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Company;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Company and any state of required
foreign qualification of Company establishing that Company is in existence
and is in good standing to transact business in its state of incorporation;
(i) an opinion of counsel to Company and Signatory Shareholders
opining as to the execution and delivery of this Agreement and the other
documents and agreements to be executed pursuant hereto, the good standing
and authority of Company, the enforceability of this Agreement and the other
agreements and documents to be executed in connection herewith, and other
matters reasonably requested by Pentegra;
(j) non-foreign affidavits executed by Company;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
<PAGE>
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Company and Signatory Shareholders, the following, all of
which shall be in a form satisfactory to counsel to Company and Signatory
Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for
Pentegra) in escrow pending Closing, pursuant to an escrow agreement or
letter agreement in form and substance mutually acceptable to the parties
hereto:
(a) the Merger Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, note, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Company;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Company;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Company to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit attached hereto, any agreement executed pursuant hereto, and
any certificate executed and delivered by any party pursuant to the terms of
this Agreement, shall constitute representations and warranties of Company
and Signatory Shareholders, jointly and severally, or of Pentegra, as the
case may be. All such representations and warranties, and all
representations and warranties expressly labeled as such in this Agreement
shall survive the date of this Agreement and the Closing Date for a period of
five (5) years following the Closing Date, except that (i) the
representations and warranties with respect to environmental and medical
waste laws and health care laws and
<PAGE>
matters shall survive for a period of fifteen (15) years and tax
representations shall survive until one year after the expiration of the
applicable statute of limitations. Each party covenants with the other
parties not to make any claim with respect to such representations and
warranties, against any party after the date on which such survival period
shall terminate. No party shall be entitled to claim indemnity from any
other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has
timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the
case may be. Each party hereby releases, acquits and discharges the other
party from any and all claims and demands, actions and causes of action,
damages, costs, expenses and rights of setoff with respect to which the
notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely
provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD COMPANY AND ITS AFFILIATES, OFFICERS, DIRECTORS,
SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING COMPANY
AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT
APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST
ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES
AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
(D) ANY LIABILITY OF PENTEGRA FOR COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEY'S FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION,
PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR
THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY COMPANY AND SIGNATORY SHAREHOLDERS. SIGNATORY
SHAREHOLDERS AND, PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR
PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4,
"INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND
ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH
OF THE FOREGOING, INCLUDING
<PAGE>
PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND
EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR
WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR
AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL
LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION
ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS
RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER
THE CLOSING DATE,
(E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY
RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A
RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH
THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS
SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS
SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE
REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO
MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS
<PAGE>
FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO
INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the
defense of such action or proceeding, such Indemnified Person shall notify
Indemnitor thereof. If any such action or other proceeding shall be brought
against any Indemnified Person, Indemnitor shall, upon written notice given
within a reasonable time following receipt by Indemnitor of such notice from
Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Company or any Shareholder giving
rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra
shall be entitled to offset the amount of damages incurred by it as a result
of such breach of warranty, representation, covenant or agreement against any
amounts payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Company
or any Shareholder contained in this Agreement or in any certificate or other
document executed and delivered by Company or any Shareholder pursuant to
this Agreement is or becomes untrue or breached in any material respect or if
Company or any Shareholder fails to comply in any material respect with any
covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
(c) at any time by Company or any Shareholder if any representation or
warranty of Pentegra contained in this Agreement or in any certificate or
other document executed and delivered by Pentegra pursuant to this Agreement
is or becomes untrue or breached in any material respect or if Pentegra fails
to comply in any material respect with any covenant or agreement contained
herein and such misrepresentation, noncompliance or breach is not cured,
waived or eliminated within twenty (20) days after receipt of written notice
thereof;
(d) by Pentegra, Shareholders or Company if the transaction contemplated
hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result
<PAGE>
of its legal, financial and operational due diligence with respect to
Company, that such termination is desirable and in the best interests of
Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares
of Pentegra Common Stock received as consideration by such party hereunder,
(ii) any interest (including without limitation, an option to buy or sell) in
any shares of Pentegra Common Stock, received by any party hereunder as
consideration, in whole or in part, and no such attempted transfer shall be
treated as effective for any purpose or (b) engage in any transaction,
whether or not with respect to any shares of Pentegra Common Stock or any
interest therein, received by any party hereunder as consideration, the
intent or effect of which is to reduce the risk of owning shares of Pentegra
Common Stock. The certificates evidencing the Pentegra Common Stock
delivered to Company pursuant to the terms hereof will bear a legend
substantially in the form set forth below and containing such other
information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Signatory Shareholders
acknowledge that the shares of Pentegra Common Stock to be delivered to
Company pursuant to this Agreement have not been and will not be registered
under the Securities Act of 1933 and may not be resold without compliance
with the Securities Act of 1933. The Pentegra Common Stock to be acquired by
Shareholders pursuant to this Agreement is being acquired solely for its own
account, for investment purposes only and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution. Each Signatory Shareholder covenants, warrants and represents
that none of the shares of Pentegra Common Stock issued to it will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable
provisions of the Securities Act, as amended, and the rules and regulations
of the Securities Exchange Commission and applicable state securities laws
and regulations. All certificates evidencing shares of Pentegra Common Stock
shall bear the following legend in addition to the legend referenced in
SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock
shall bear any legend required by the securities or blue sky laws of any
state where Company resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Each signatory shareholder is able
to bear the economic risk of an investment in Pentegra Common Stock acquired
pursuant to this Agreement and can afford to sustain a total loss of such
investment and have such knowledge and experience in financial and business
matters that they are capable of evaluating the merits and risks of the
proposed investment and therefore have the capacity to protect their own
interests in connection with the acquisition of the Pentegra Common Stock.
Signatory Shareholders and their representatives have had an adequate
opportunity to ask questions and receive answers from the officers of
Pentegra concerning any and all matters relating to the background and
experience of the officers and directors of Pentegra, the plans for the
operations of the business of Pentegra, and any plans for additional
acquisitions and the like. Signatory Shareholders and their representatives
have asked any and all questions in the nature described in the preceding
sentence and all questions have been answered to their satisfaction.
Signatory Shareholders are
<PAGE>
"accredited investor" as defined in Regulation D of the Securities Act of
1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and
Signatory Shareholders recognize and acknowledge that they had in the past,
currently have, and in the future may possibly have, access to certain
confidential information of Pentegra that is a valuable, special and unique
asset of Pentegra's businesses. Company and Signatory Shareholders agree
that it will not disclose such confidential information to any person, firm,
corporation, association or other entity for any purpose or reason
whatsoever, unless (i) such information becomes available to or known by the
public generally through no fault of Company or Signatory Shareholders, (ii)
disclosure is required by law or the order of any governmental authority
under color of law, provided, that prior to disclosing any information
pursuant to this clause (ii), Company and Signatory Shareholders shall, if
possible, give prior written notice thereof to the other parties hereto, and
provide such other parties hereto with the opportunity to contest such
disclosure, (iii) Company and Signatory Shareholders reasonably believe that
such disclosure is required in connection with the defense of a lawsuit or
any legal action against the disclosing party, or (iv) Company and Signatory
Shareholders are the sole and exclusive owner of such confidential
information as a result of the transactions contemplated hereunder or
otherwise. In the event of a breach or threatened breach by Company or
Signatory Shareholders of the provisions of this SECTION 13, Pentegra shall
be entitled to an injunction restraining Company and Signatory Shareholders
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Pentegra from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. The obligations of the parties under this SECTION 13 shall
survive the termination of this Agreement.
Pentegra recognizes and acknowledges that it had in the past, currently
has, and in the future may possibly have, access to certain confidential
information of Company that is a valuable, special and unique asset of
Company. Pentegra agrees that it will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, unless (i) such information becomes
available to or known by the public generally through no fault of Pentegra,
(ii) disclosure is required by law or the order of any governmental authority
under color of law, provided, that prior to disclosing any information
pursuant to this clause (ii), Pentegra shall, if possible, give prior written
notice thereof to the other parties hereto, and provide such other parties
hereto with the opportunity to contest such disclosure, (iii) Pentegra
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party, or (iv) Pentegra is the
sole and exclusive owner of such confidential information as a result of the
transaction contemplated hereunder or otherwise. In the event of a breach or
threatened breach by Pentegra of the provision of this SECTION 13, Company
shall be entitled to an injunction restraining Pentegra from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting Pentegra from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages. The
obligations of the parties under this SECTION 13 shall survive the
termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement will qualify as a reorganization within the meaning of
Section 368(a) of the Code. The tax returns (and schedules thereto) of
Shareholders, Company and Pentegra shall be filed in a manner consistent
with such intention and Shareholders and Pentegra shall each provide the
other with such tax information, reports, returns or schedules as may be
reasonably required to assist the other in so reporting the transactions
contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
<PAGE>
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Company and Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Company or any Shareholder for services
rendered in connection with negotiating and closing the transactions
contemplated by this Agreement or the documents to be executed in connection
herewith, whether or not such costs or expenses are incurred before or after
the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Company.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF TEXAS
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
<PAGE>
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS AND THE ESCROW LETTER ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT
OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS
BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one and the
same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Company, be relieved from its obligations
to Company under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Company, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Company and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Company or may demand from Company, and Company agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Company or Shareholders (hereinafter referred to as a "Party"), whether made
before or after the institution of any legal proceeding, any dispute among
the parties hereto in any way arising out of, related to, or in connection
with this Agreement (hereinafter a "Dispute"), shall be resolved by binding
arbitration in accordance with the terms of this Section (hereinafter the
"Arbitration Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
<PAGE>
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or foreclosing upon any
personal property in which there has been granted a security interest or lien
by a Party in the Documents. In Disputes involving indebtedness or other
monetary obligations, each Party agrees that the other Party may proceed
against all liable persons, jointly and severally against one or more of
them, without impairing rights against other liable persons. Nor shall a
Party be required to join the principal obligor or any other liable persons
(e.g., sureties or guarantors) in any proceeding against a particular person.
A Party may release or settle with one or more liable persons as the Party
deems fit without releasing or impairing rights to proceed against any
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoenix,
Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or by
applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or
<PAGE>
unenforceable under present or future laws, such provision shall be fully
severable and this Agreement shall be construed and enforced as if such
provision never comprised a part hereof; and the remaining provisions hereof
shall remain in full force and effect. In lieu of such provision, there
shall be added automatically as part of this Agreement, a provision as
similar in its terms to such provision as may be possible and be legal, valid
and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
Walter J. Anderson, D.D.S.,
Donald H. Plotkin, D.D.S.,
William H. Swilley, D.D.S.,
William A. Cerny, D.D.S. and
Graham K. Satchell, D.D.S.,
Inc., dba Anderson Dental Group
By: /s/ Walter Anderson, D.D.S.
---------------------------------
Walter Anderson, D.D.S.
President
PENTEGRA DENTAL GROUP, INC.
<PAGE>
By: /s/ Kim Rozman
--------------------------------
Its: Senior Vice President
--------------------------------
/s/ Afshan Kaviani, D.D.S.
- ---------------------------------
Afshan Kaviani, D.D.S.
/s/ Donald H. Plotkin, D.D.S.
- ---------------------------------
DONALD H. PLOTKIN, D.D.S.
/s/ Brian M. Ellis, D.D.S.
- ---------------------------------
BRIAN M. ELLIS, D.D.S.
/s/ Walter J. Anderson, D.D.S.
- ---------------------------------
WALTER J. ANDERSON, D.D.S.
/s/ William A. Cerny, D.D.S.
- ---------------------------------
WILLIAM A. CERNY, D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Merger Consideration
A Target Companies
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment
Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
4.16 Excluded Assets and Excluded Liabilities
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
RONNIE ANDRESS, D.D.S., INC.
and
RONNIE ANDRESS, D.D.S.
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. . . . . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS . . . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. . . . . . . . . . . 3
2.4 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES. . . . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . 3
2.8 LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. . . . . . . . . . . . . . . . . 4
2.11 INVENTORIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. . . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES . . . . . . . . 4
2.14 LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL. . . . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS . . . . . . . . 8
2.28 PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING . . . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS. . . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. . . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.6 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Section 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. . . . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. . . . . . . . . . 10
4.5 ACQUISITION PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . . 10
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES. . . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT ACQUISITION . . . . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE . . . . . . . . . . . . . . . . . . 11
4.12 LEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.13 HIRING OF EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. . . . . . . . . . . . . . . . . . 12
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. . . . . . . . . . 12
Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 13
7.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . 13
7.3 PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.4 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . 13
7.5 DUE DILIGENCE REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.6 APPROVAL BY THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . 13
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. . . . . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL . . . . . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 14
8.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . 14
8.3 PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.4 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.5 SECURITIES APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.2 INDEMNIFICATION BY PENTEGRA. . . . . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . . . 17
10.4 INDEMNIFICATION PROCEDURE. . . . . . . . . . . . . . . . . . . . . . . 18
10.5 RIGHT OF SETOFF. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 19
12.2 INVESTMENTS; COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION. . . . . . . . . . . . . . . . . . . . . 20
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . 21
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . 22
14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed
as of August 15, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra"), Ronnie Andress, D.D.S., Inc.
("Contributor") and Ronnie Andress, D.D.S., shareholders of Contributor
(referred to herein as "Shareholder" or "Shareholders").
WITNESSETH:
WHEREAS, Contributor operates a dental practice ("Business") and Pentegra
is engaged in the business of managing certain non-dentistry aspects of
dental practices;
WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra
desires to receive from Contributor, certain assets of Contributor;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Contributor, the "Target
Companies");
WHEREAS, it is intended for Federal income tax purposes that the
transfers contemplated by this Agreement, the Other Agreements and Pentegra's
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an
exchange within the meaning of Section 351 of the Internal Revenue Code of
1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and
conditions contained herein, on the Closing Date, Contributor shall convey,
transfer, deliver and assign to Pentegra or any affiliate of Pentegra
designated by Pentegra all of Contributor's right, title and interest in and
to those certain assets described on EXHIBIT 1.1 attached hereto
(individually, "Asset", and collectively "Assets"), free and clear of all
obligations, security interests, claims, liens and encumbrances, except as
specifically assumed, or taken subject to, by Pentegra pursuant to SECTION
1.3(b) hereof.
<PAGE>
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and contributed hereunder, and Contributor shall retain all of
its right, title and interest in and to, the assets not specifically
transferred hereunder, including without limitation, the assets described on
EXHIBIT 1.2 (the "Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Contributor
contained herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Contributor the consideration
specified in ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Contributor listed on EXHIBIT
1.3(b) attached hereto to the extent that such obligations, commitments,
liabilities and indebtedness are current and not otherwise in default. (the
"Assumed Liabilities"). Notwithstanding any contrary provision contained
herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra
assume: (i) any liability, commitment or obligation or trade payable or
indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability
set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of
or default under such contracts, leases, commitments or obligations which
occurred on or before the Closing Date; (iii) any liability for any employee
benefits payable to employees of Contributor, including, but not limited to,
liabilities arising under any Contributor Plan (as defined in SECTION 2.21
hereof); (iv) any liability based upon or arising out of a violation of any
antitrust or similar restraint-of-trade laws by any Shareholder or
Contributor, including, without limiting the generality of the foregoing, any
such antitrust liability which may arise in connection with agreements,
contracts, commitments or orders for the sale of goods or provision of
services by Contributor reflected on the books of Contributor at or prior to
the Closing Date; (v) any liability based upon or arising out of any tortious
or wrongful actions of Contributor, any licensed professional employee or
independent contractor of Contributor or any Shareholder, (vi) any liability
for the payment of any taxes of Contributor or any Shareholder, including
without limitation, sales, use and other transfer taxes and income taxes
arising from or by reason of the transactions contemplated by this Agreement;
(vii) any indebtedness secured by deeds of trust or mortgages on real
property; nor (viii) any liability incurred or to be incurred pursuant to any
malpractice or other suits or actions pending against Contributor or any
Shareholder.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement,
Contributor and Shareholders shall execute and deliver all such deeds, bills
of sale, assignments and assurances and take and do all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any
and all right, title and interest in, to and under the Assets in Pentegra or
otherwise to carry out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS.
Contributor and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Contributor is a professional
corporation or association, as applicable, duly organized, validly existing
and in good standing under the laws of the State of
<PAGE>
Texas. Contributor has all necessary corporate powers to own all of its
assets and to carry on its business as such business is now being conducted.
Contributor does not own stock in or control, directly or indirectly, any
other corporation, association or business organization, nor is Contributor a
party to any joint venture or partnership. The Shareholders are the sole
shareholders of Contributor and own all outstanding shares of capital stock
free of all security interests, claims, encumbrances and liens in the amounts
set forth on EXHIBIT 2.1. Each share of Contributor's common stock has been
legally and validly issued and fully paid and nonassessable. No shares of
capital stock of Contributor are owned by Contributor in treasury. There are
no outstanding (a) bonds, debentures, notes or other obligations the holders
of which have the right to vote with the stockholders of Contributor on any
matter, (b) securities of Contributor convertible into equity interests in
Contributor, or (c) commitments, options, rights or warrants to issue any
such equity interests in Contributor, to issue securities of Contributor
convertible into such equity interests, or to redeem any securities of
Contributor. No shares of capital stock of Contributor have been issued or
disposed of in violation of the preemptive rights, rights of first refusal or
similar rights of any of Contributor's stockholders. Contributor is not
required to qualify to do business as a foreign corporation in any other
state or jurisdiction by reason of its business, properties or activities in
or relating to such other state or jurisdiction. Contributor does not have
any assets, employees or offices in any state other than the state set forth
in the first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the corporate
power to execute, deliver and perform this Agreement and all agreements and
other documents executed and delivered by it pursuant to this Agreement or to
be executed and delivered on the Closing Date, and has taken all action
required by law, its Articles or Certificate of Incorporation, its Bylaws or
otherwise, to authorize the execution, delivery and performance of this
Agreement and such related documents. Each Shareholder has the legal
capacity to enter into and perform this Agreement and the other agreements to
be executed and delivered in connection herewith. Contributor has obtained
the approval of its stockholders necessary to the consummation of the
transactions contemplated herein. This Agreement and all agreements and
documents executed and delivered in connection herewith have been, or will be
as of the Closing Date, duly executed and delivered by Contributor and
Shareholders, as appropriate, and constitute or will constitute the legal,
valid and binding obligations of Contributor and Shareholders, enforceable
against Contributor and Shareholders in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally or the availability of
equitable remedies. The execution and delivery of this Agreement, and the
agreements executed and delivered pursuant to this Agreement or to be
executed and delivered on the Closing Date, do not, and, subject to the
receipt of consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, violate any provision of the Articles or
Certificate of Incorporation or Bylaws of Contributor or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or
decree to which Contributor or any Shareholder is a party or by which
Contributor or any Shareholder is bound, or violate any material restrictions
of any kind to which Contributor is subject, or result in any lien or
encumbrance on any of Contributor's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to
the knowledge of Contributor and Shareholders, threatened, which may result
in the revocation, cancellation or suspension, or any adverse modification,
of any such licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and
<PAGE>
performance of this Agreement and the agreements and documents contemplated
hereby on the part of Contributor or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been declared or paid by Contributor on any of its capital
stock since the Balance Sheet Date. No repurchase of any of Contributor's
capital stock has been approved, effected or is pending, or is contemplated
by Contributor.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Contributor and all
amendments thereto have been delivered to Pentegra. The minute books of
Contributor contain accurate minutes of all meetings of and consents to
actions taken without meetings of the Board of Directors and stockholders of
Contributor since its formation. The books of account of Contributor have
been kept accurately in the ordinary course of business and the revenues,
expenses, assets and liabilities of Contributor have been properly recorded
in such books.
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore
furnished Pentegra with copies of its unaudited balance sheet and related
unaudited statements of income, retained earnings and cash flows for its
prior two full fiscal years, as well as copies of its unaudited balance sheet
as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet"
and the latest date thereof shall be referred to as the "Balance Sheet Date")
and any related unaudited statements of income, retained earnings, schedule
of accounts receivable, accounts payable and accrued liabilities, and cash
flows for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Contributor as
of the dates and for the periods indicated and reflect all fixed and
contingent liabilities of Contributor.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Contributor or any Shareholder leases, as lessor or lessee,
real or personal property used in operating the Business, related to the
Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and
enforceable in accordance with their respective terms, and there is not under
any such lease any existing default by Contributor, as lessor or lessee, or
any condition or event of which any Shareholder or Contributor has knowledge
which with notice or lapse of time, or both, would constitute a default, in
respect of which Contributor or Shareholders have not taken adequate steps to
cure such default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Contributor and Shareholders have
no knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good, valid
and marketable title to all of the Assets, free and clear of any liens,
claims, charges, exceptions or encumbrances, except for those, if any, which
are set forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all
encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances
indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the
Closing Date and evidence of such releases of liens and claims shall be
provided to Pentegra on the Closing Date and the Assets shall not be used to
satisfy such liens, claims or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Contributor, are in good, current, standard and merchantable
condition and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Contributor has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing
<PAGE>
processes, trade names, trademarks, service marks, inventions, specialized
treatment protocols, copyrights, formulas and trade secrets or similar items.
Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor
companies of Contributor, including the names of any entities from whom
Contributor previously acquired significant assets. Except for off-the-shelf
software licenses and except as set forth on EXHIBIT 2.12, Contributor is not
a licensee in respect of any patents, trademarks, service marks, trade names,
copyrights or applications therefor, or manufacturing processes, formulas or
trade secrets or similar items and no such licenses are necessary for the
conduct of the Business or the use of the Assets. No claim is pending or has
been made to the effect that the Assets or the present or past operations of
Contributor in connection with the Assets or Business infringe upon or
conflict with the asserted rights of others to any patents, patent rights,
manufacturing processes, trade names, trademarks, service marks, inventions,
licenses, specialized treatment protocols, copyrights, formulas, know-how and
trade secrets. Contributor has the sole and exclusive right to use all
Assets constituting proprietary rights without infringing or violating the
rights of any third parties and no consents of any third parties are required
for the use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the name of each director and officer of
Contributor and the offices held by each, (b) the most recent payroll report
of Contributor, showing all current employees of Contributor and their
current levels of compensation, (c) promised increases in compensation of
employees of Contributor that have not yet been effected, (d) oral or written
employment agreements, consulting agreements or independent contractor
agreements (and all amendments thereto) to which Contributor is a party,
copies of which have been delivered to Pentegra, and (e) all employee
manuals, materials, policies, procedures and work-related rules, copies of
which have been delivered to Pentegra. Contributor is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Contributor has not engaged in any unfair labor
practice. There are no unfair labor practices charges or complaints pending
or threatened against Contributor, and Contributor has never been a party to
any agreement with any union, labor organization or collective bargaining
unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Contributor nor the
Business nor any of the Assets is subject to any pending, nor does
Contributor or any Shareholder have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Contributor, any Shareholder, the Business, the
Assets or the transactions contemplated by this Agreement, and, to the
knowledge of Contributor and Shareholders, no basis for any such action
exists, nor is there any legal impediment of which Contributor or any
Shareholder has knowledge to the continued operation of its business or the
use of the Assets in the ordinary course, subject to consents set forth on
EXHIBIT 2.4.
2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Contributor ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted or may be made
by any party thereto. Except as indicated on such Exhibits, there is not
under any such Contract any existing default by Contributor or any
Shareholder, or any condition or event of which Contributor or any
Shareholder has knowledge which with notice or lapse of time, or both, would
constitute a default. Contributor and Shareholders have no knowledge of any
default by any other party to such Contracts. Contributor and Shareholders
have not received notice of the intention of any party to any Contract to
cancel or terminate any Contract and have no reason to believe that any
amendment or change
<PAGE>
to any Contract is contemplated by any party thereto. Other than those
contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13
and EXHIBIT 2.15, Contributor are not a party to any material written or oral
agreement contract, lease or arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
the Contributor or Shareholders, oral or written, that provide for
prepayments or deferred installment payments; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Contributor on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16,
Contributor has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(d) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
<PAGE>
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Contributor since the Balance
Sheet Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(j) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties,
assets or business or the Business or the Assets, or experienced any other
material adverse change in its financial condition, assets, prospects,
liabilities or business;
(n) Declared or paid a distribution, payment or dividend of any
kind on the capital stock of Contributor;
(o) Repurchased, approved any repurchase or agreed to repurchase
any of Contributor's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Contributor has filed all tax returns (including tax
reports and other statements) required to have been filed by it, and has paid
all taxes (including any interest, penalty or additions thereto) required to
have been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Contributor has not received any notice that any tax deficiency
or delinquency has been or may be asserted against Contributor. There are
no audits relating to taxes of Contributor pending or in process or, to the
knowledge of Contributor, threatened. Contributor is not currently the
beneficiary of any waiver of any statute of limitations in respect of taxes
nor of any extension of time within which to file any tax return or to pay
any tax assessment or deficiency. There are no liens or encumbrances
relating to taxes on or threatened against any of the assets of Contributor.
Contributor has withheld and paid all taxes required by law to have been
withheld and paid by
<PAGE>
it. Neither Contributor nor any predecessor of Contributor is or has been a
party to any tax allocation or sharing agreement or a member of an affiliated
group of corporations filing a consolidated Federal income tax return.
Contributor has delivered to Pentegra correct and complete copies of
Contributor's three most recently filed annual state, local and Federal
income tax returns, together with all examination reports and statements of
deficiencies assessed against or agreed to by Contributor during the three
calendar year period preceding the date of this Agreement. Contributor has
neither made any payments, is obligated to make any payments, or is a party
to any agreement that under any circumstance could obligate it to make any
payments that will not be deductible under Code section 280G.
(b) Contributor does not intend to dispose of any of the shares of
Pentegra Common Stock to be received hereunder and is not a party to any
plan, arrangement or agreement for the disposition of such shares.
Contributor and Shareholders have no knowledge, after due inquiry, of any
such intent, plan, arrangement or agreement by any Shareholder. Nothing
contained herein shall prohibit Contributor from selling such shares of
Pentegra Common Stock after the designated holding period and in accordance
with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated
by this Agreement which may be now or hereafter asserted against Pentegra,
Contributor or Contributor's shareholders resulting from any action taken by
Contributor or any Shareholder or their respective agents or employees, or
any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Contributor did not have, as of the Balance
Sheet Date, and has not incurred since that date and will not have incurred
as of the Closing Date, any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
other than those incurred in the ordinary course of business or as set forth
on EXHIBIT 2.16. Contributor and Shareholders do not know, or have
reasonable grounds to know, of any basis for the assertion against
Contributor or any Shareholder as of the Balance Sheet Date, of any claim or
liability of any nature in any amount not fully reflected or reserved against
on the Balance Sheet, or of any claim or liability of any nature arising
since that date other than those incurred in the ordinary course of business
or contemplated by this Agreement. All indebtedness of Contributor
(including without limitation, indebtedness for borrowed money, guaranties
and capital lease obligations) is described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Contributor, each Shareholder and each licensed
professional of Contributor carries property, liability, malpractice,
workers' compensation and such other types of insurance as is customary in
the industry. Valid and enforceable policies in such amounts are outstanding
and duly in force and will remain duly in force through the Closing Date.
All such policies are described in EXHIBIT 2.20 attached hereto and true and
correct copies have been delivered to Pentegra. Neither Shareholders nor
Contributor have not received notice or other communication from the issuer
of any such insurance policy cancelling or amending such policy or
threatening to do so. Neither Contributor, nor any Shareholder nor any
licensed professional employee of Contributor has any outstanding claims,
settlements or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Contributor has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Contributor
Plan," and collectively "Contributor Plans") have been operated and
administered in all material respects in accordance with all applicable laws,
rules and regulations, including
<PAGE>
without limitation, ERISA, the Internal Revenue Code of 1986, as amended,
Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of
1967, as amended, the Age Discrimination in Employment Act of 1967, as
amended, and the related rules and regulations adopted by those Federal
agencies responsible for the administration of such laws. No act or failure
to act by Contributor has resulted in a "prohibited transaction" (as defined
in ERISA) with respect to the Contributor Plans. No "reportable event" (as
defined in ERISA) has occurred with respect to any of the Contributor Plans.
Contributor has not previously made, is not currently making, and is not
obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Contributor Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at least equal to the
value of plan liabilities or (ii) the value of plan liabilities in excess of
plan assets is disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Contributor, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Shareholders and
Contributor's licensed professional employees, and the conduct of the
Business and use of the Assets, have complied with all applicable laws,
rules, regulations and licensing requirements, including, without limitation,
the Federal Environmental Protection Act, the Occupational Safety and Health
Act, the Americans with Disabilities Act and any environmental laws and
medical waste laws, and there exist no violations by Contributor, any
Shareholder or any licensed professional employee of Contributor of any
Federal, state or local law or regulation. Contributor and Shareholders have
not received any notice of a violation of any Federal, state and local laws,
regulations and ordinances relating to the operations of the Business and
Assets and no notice of any pending inspection or violation of any such law,
regulation or ordinance has been received by Contributor.
2.24 THIRD PARTY PAYORS. Contributor, Shareholders and each licensed
professional employee or independent contractor of Contributor has timely
filed all claims or other reports required to be filed with respect to the
purchase of services by third-party payors, and all such claims or reports
are complete and accurate, and has no liability to any payor with respect
thereto. There are no pending appeals, overpayment determinations,
adjustments, challenges, audit, litigation or notices of intent to open
Medicare or Medicaid claim determinations or other reports required to be
filed by Contributor, any Shareholder and each licensed professional employee
of Contributor. Neither Contributor, nor any Shareholder, nor any licensed
professional employee of Contributor has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Contributor, Shareholders and Contributor's licensed professional employees
has not (a) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made
any false statement or representation of a material fact for use in
determining rights to any benefit or payment; (c) failed to disclose
knowledge of the occurrence of any event affecting the initial or continued
right to any benefit or payment on its own behalf or on behalf of another,
with the intent to fraudulently secure such benefit or payment; and (d)
violated any applicable state anti-remuneration or self-referral statutes,
rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Contributor or Shareholders in this Agreement, and no Exhibit or certificate
issued or executed by, or information furnished by, officers or directors of
Contributor or any Shareholder and furnished or to be furnished to
<PAGE>
Pentegra pursuant hereto, or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
or facts contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Contributor has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Contributor, or their respective
spouses, children or affiliates, owns directly or indirectly, on an
individual or joint basis, any interest in, has a compensation or other
financial arrangement with, or serves as an officer or director of, any
customer or supplier or competitor of Contributor or any organization that
has a material contract or arrangement with Contributor.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Contributor's services which
accounted for more than 10% of revenues of Contributor in the preceding
fiscal year. Contributor has good relations with all such payors and other
material payors of Contributor and none of such payors has notified
Contributor that it intends to discontinue its relationship with Contributor
or to deny any claims submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Contributor and Shareholders
as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Pentegra or waivers
thereof, have
<PAGE>
been duly obtained and are in full force and effect, except as would not have
a material adverse effect upon Pentegra. Other than as would not have a
material adverse effect, there are no proceedings pending or, to the
knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has knowledge to the continued operation of its business or the use
of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Contributor or
any Shareholder pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
SECTION 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS.
Contributor and Shareholders, jointly and severally, agree that between
the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Shareholders
shall use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions.
Contributor and Shareholders agree to complete the Exhibits hereto to be
provided by them in form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Contributor and Shareholders shall operate the
Business and use the Assets in the ordinary course. Contributor and
Shareholders shall not enter into any lease, contract, indebtedness,
commitment, purchase or sale or acquire or dispose of any capital asset
relating to the Business or the Assets except in the ordinary course of
business. Contributor and Shareholders shall use
<PAGE>
their best efforts to preserve the Business and Assets intact and shall not
take any action that would have an adverse effect on the Business or Assets.
Contributor and Shareholders shall use their best efforts to preserve intact
the relationships with payors, customers, suppliers, patients and others
having significant business relations with Contributor. Contributor and
Shareholders shall collect its receivables and pay its trade payables in the
ordinary course of business. Contributor and Shareholders shall not
introduce any new method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Contributor and Shareholders shall permit
Pentegra and its authorized representatives access to, and make available for
inspection, all of the assets and business of Contributor, the Business and
the Assets, including employees, customers and suppliers and permit Pentegra
and its authorized representatives to inspect and make copies of all
documents, records and information with respect to the business or assets of
Contributor, the Business or the Assets as Pentegra or its representatives
may request. Contributor and Shareholders shall promptly notify Pentegra in
writing of (a) any notice or communication relating to a default or event
that, with notice or lapse of time or both, could become a default, under any
contract, commitment or obligation to which Contributor is a party or
relating to the Business or the Assets, and (b) any adverse change in
Contributor's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor
and Shareholders shall use their best efforts to secure all necessary
approvals and consents of third parties to the consummation of the
transactions contemplated hereby, including consents described on EXHIBIT
2.4. Contributor and Shareholders shall use their best efforts to obtain all
licenses, permits, approvals or other authorizations required under any law,
rule, regulation, or otherwise to provide the services of Contributor
contemplated by the Service Agreement and to conduct the intended business of
Contributor and operate the Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance
with the provisions hereof, Contributor and Shareholders shall not, and shall
use its best efforts to cause Contributor's employees, agents and
representatives not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer, including without limitation, any proposal or offer to any
Shareholder, with respect to a merger, acquisition, consolidation or similar
transaction involving, or the purchase of all or any significant portion of
the assets or any equity securities of Contributor or engage in any
negotiations concerning, or provide any confidential information or data to,
or have any discussions with, any person relating to such proposal or offer,
and Contributor and Shareholders will immediately cease any such activities,
discussions or negotiations heretofore conducted with respect to any of the
foregoing. Contributor and Shareholders shall immediately notify Pentegra if
any such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby covenants
and agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Contributor or any entity might have any liability
whatsoever arising from any insurance, pension plan, employment tax or
similar liability of Contributor to any employee or other person or entity
(including, without limitation, any Contributor Plan and any liability under
employment contracts with Contributor) allocable to services performed prior
to the Closing Date. Contributor and Shareholders acknowledge that the
purpose and intent of this covenant is to assure that Pentegra shall have no
unfunded liability whatsoever at any time after the Closing Date with respect
to any of Contributor's employees or similar persons or entities, including,
without limitation, any Contributor Plan for the period prior to the Closing
Date.
4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash
compensation of any Shareholder (other than in the ordinary
<PAGE>
course of business) or other employee or an independent contractor of
Contributor, adopt, amend or terminate any compensation plan, employment
agreement, independent contractor agreement, employee policies and procedures
or employee benefit plan, take any action that could deplete the assets of
any employee benefit, or fail to pay any premium or contribution due or file
any report with respect to any employee benefit plan, or take any other
actions with respect to its employees or employee matters which might have an
adverse effect upon Contributor, its business, assets or prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Contributor, nor will any repurchase
of any of Contributor's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Shareholders
shall use their best efforts to take, or cause to be taken, all actions
necessary to effect the acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Contributor and Shareholders will not
change in any material respect the tax or financial accounting methods or
practices followed by Contributor (including any material change in any
assumption underlying, or any method of calculating, any bad debt,
contingency or other reserve), except as may be required by law or generally
accepted accounting principles. Contributor and Shareholders will duly,
accurately and timely (without regard to any extensions of time) file all
returns, information statements and other documents relating to taxes of
Contributor required to be filed by it, and pay all taxes required to be paid
by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Contributor hereby waive any compliance with the applicable state Bulk
Transfers Act, if any. Contributor and Shareholders covenant and agree that
all of the creditors with respect to the Business and the Assets will be paid
in full by Contributor prior to the Closing Date, except to extent that any
liability to such creditors is assumed by Pentegra pursuant to this
Agreement. If required by Pentegra, Contributor and Shareholders shall
furnish Pentegra with proof of payment of all creditors with respect to the
Business and the Assets. Notwithstanding the foregoing, Contributor and
Shareholders may dispute the validity or amount of any such creditor's claim
without being deemed to be in violation of this SECTION 4.11, provided that
such dispute is in good faith and does not unreasonably delay the resolution
of the claim and provided, further that Contributor and Shareholders agree to
indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Contributor leases any of its premises from any
Shareholder or other affiliate of Contributor or any shareholder of
Contributor, Pentegra shall have entered into a building lease (the "Building
Lease") with the owner of such premises on terms and conditions satisfactory
to Pentegra, the terms and conditions of which shall include, without
limitation, (i) a five year initial term plus three five-year renewal
options, (ii) a lease rate equal to the fair market value lease rate, as
agreed to by Pentegra, and (iii) such other provisions to be acceptable to
Pentegra.
4.13 HIRING OF EMPLOYEES. Contributor and Shareholders shall cooperate
with all requests made by Pentegra for the purpose of allowing Pentegra to
hire those non-dental employees of Contributor designated by Pentegra, such
employment to be effective as of the Closing Date. Notwithstanding the
above, Contributor and Shareholders shall remain liable under any Contributor
Plans for any claims incurred by any employees or their spouses or
dependents, and for all compensation, bonuses, benefits and other such items
and other liabilities related to Contributor's employees incurred by
Contributor prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges that
all employees of
<PAGE>
Contributor hired by Pentegra pursuant to SECTION 4.13 above, shall be
treated as "leased employees" (as defined in Code Section 414(n)) of
Contributor and shall be treated as Clinic employees for purposes of
eligibility and participation in Contributor Plans.
4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates to
be named as an additional insured on its liability insurance programs,
effective as of the Closing Date.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS.
Pentegra, Shareholders and Contributor agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Contributor and Shareholders
shall cooperate to promptly prepare and file with the Securities Exchange
Commission ("SEC") the Registration Statement on Form S-1 (or other
appropriate Form) to be filed by Pentegra in connection with its Initial
Public Offering (including the prospectus constituting a part thereof, the
"Registration Statement"). Pentegra shall obtain all necessary state
securities laws or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement and the Contributor and
Shareholders shall furnish all information concerning Contributor and
Shareholders as may be reasonable requested in connection with any such
action.
Contributor and Shareholder represent and warrant that none of the
information or documents supplied or to be supplied by it specifically for
inclusion in the Registration Statement, by exhibit or otherwise, will, at
the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act of 1933, 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, in
light of the circumstances under which they were made, not misleading.
Contributor and Shareholders shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.
Contributor and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by
Pentegra in connection with the preparation of the Registration Statement and
each amendment or supplement thereto, or any other statement, filing, notice
or application made by or on behalf of each such party or any of its
subsidiaries to any governmental entity in connection with the transactions
contemplated by the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
<PAGE>
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Contributor and Shareholders contained herein shall have been true and
correct in all respects when initially made and shall be true and correct in
all respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Contributor and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Contributor and Shareholders
prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Contributor shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Contributor, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and Pentegra
shall have executed and delivered a Service Agreement (the "Service
Agreement"), in substantially the form attached hereto as EXHIBIT 7.7,
pursuant to which Pentegra will provide management services to the
Contributor. Each Shareholder shall have executed and delivered a Guaranty
Agreement in substantially the form attached as EXHIBIT 4.10 of the Service
Agreement pursuant to which Shareholder shall, among other things, guaranty
the obligations of Contributor under the Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated, and
caused each shareholder of Contributor that has an existing employment
agreement with Contributor to have terminated his or her employment agreement
with Contributor and shall have executed an employment agreement ("Employment
Agreement") with Contributor in form and substance attached hereto as EXHIBIT
7.8 and otherwise satisfactory to Contributor and Pentegra.
7.9 CONSENTS AND APPROVALS. Contributor and Shareholders shall have
obtained all necessary government and other third-party approvals and
consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables
or payables between Contributor and its shareholders or affiliates and
Contributor shall not have any liabilities, including indebtedness,
guaranties and capital leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Contributor and Shareholders shall have named Pentegra
as an additional insured on their liability insurance program in accordance
with SECTION 4.15.
<PAGE>
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Contributor since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Contributor and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pentegra contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Contributor shall have received all documents,
duly executed in form satisfactory to Contributor and its counsel, referred
to in SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. Within five business
days after requested by Pentegra, Contributor and Shareholders shall deliver
to Pentegra the following, all of which shall be in a form satisfactory to
counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel
for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or
letter agreement in form and substance mutually acceptable to the parties
hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
<PAGE>
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of
Contributor authorizing the execution, delivery and performance of this
Agreement, the Service Agreement, the Employment Agreements and all related
documents and agreements each certified by the Secretary as being true and
correct copies of the original thereof;
(d) a bill of sale conveying the Assets to Pentegra;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(f) certificates of the Shareholders and a duly authorized officer
of Contributor dated as of the Closing Date, (i) as to the truth and
correctness of the representations and warranties of Contributor and
Shareholder contained herein; (ii) as to the performance of and compliance by
Contributor and Shareholder with all covenants contained herein; and (iii)
certifying that all conditions precedent of Contributor and Shareholders to
the Closing have been satisfied;
(g) a certificate of the Secretary of Contributor certifying as to
the incumbency of the directors and officers of Contributor and as to the
signatures of such directors and officers who have executed documents
delivered at the Closing on behalf of Contributor;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Contributor and any state of
required foreign qualification of Contributor establishing that Contributor
is in existence and is in good standing to transact business in its state of
incorporation;
(i) an opinion of counsel to Contributor and Shareholder opining as
to the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Contributor, the enforceability of this Agreement and the other agreements
and documents to be executed in connection herewith, and other matters
reasonably requested by Pentegra;
(j) non-foreign affidavits executed by Contributor;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Contributor, in substantially the form attached hereto as EXHIBIT 9.1(L) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Contributor and Shareholder, the following, all of which
shall be in a form satisfactory to counsel to Contributor and Shareholders
and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in
escrow pending Closing, pursuant to an escrow agreement or letter agreement
in form and substance mutually acceptable to the parties hereto:
(a) the Acquisition Consideration;
<PAGE>
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Contributor;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Contributor;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Contributor to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit attached hereto, any agreement executed pursuant hereto, and
any certificate executed and delivered by any party pursuant to the terms of
this Agreement, shall constitute representations and warranties of
Contributor and Shareholders, jointly and severally, or of Pentegra, as the
case may be. All such representations and warranties, and all
representations and warranties expressly labeled as such in this Agreement
shall survive the date of this Agreement and the Closing Date for a period of
five (5) years following the Closing Date, except that (i) the
representations and warranties with respect to environmental and medical
waste laws and health care laws and matters shall survive for a period of
fifteen (15) years and tax representations shall survive until one year after
the expiration of the applicable statute of limitations. Each party covenants
with the other parties not to make any claim with respect to such
representations and warranties, against any party after the date on which
such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof,
unless such party has timely given the notice required in SECTION 10.2, 10.3
or 10.4 hereof, as the case may be. Each party hereby releases, acquits and
discharges the other party from any and all claims and demands, actions and
causes of action, damages, costs, expenses and rights of setoff with respect
to which the notices required by SECTION 10.2,
<PAGE>
10.3 or 10.4, as applicable, are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD CONTRIBUTOR AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES
(EACH OF THE FOREGOING, INCLUDING CONTRIBUTOR AND SHAREHOLDERS, FOR PURPOSES
OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN
"INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES,
LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING,
BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH
APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. CONTRIBUTOR AND
SHAREHOLDERS (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT
APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL
INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS,
SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND
EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR
WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
<PAGE>
HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO
BE FURNISHED BY INDEMNITOR HEREUNDER, AND
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS WHETHER ON OR
AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY CONTRIBUTOR OR ITS SHAREHOLDERS OR THEIR
CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE
OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR
OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE CONTRIBUTOR OR
SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER
ON OR AFTER THE CLOSING DATE,
(E) TAXES OF CONTRIBUTOR OR ANY SHAREHOLDER OR ANY OTHER PERSON OR
ENTITY RELATED TO OR AFFILIATED WITH THE CONTRIBUTOR OR SHAREHOLDER ARISING
FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF CONTRIBUTOR OR THE SHAREHOLDERS FOR COSTS AND
EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN
CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN
CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(B), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS
SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE CONTRIBUTOR OR
ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS,
THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
CONTRIBUTOR OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO
MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
<PAGE>
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the
defense of such action or proceeding, such Indemnified Person shall notify
Indemnitor thereof. If any such action or other proceeding shall be brought
against any Indemnified Person, Indemnitor shall, upon written notice given
within a reasonable time following receipt by Indemnitor of such notice from
Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Contributor or any Shareholder
giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof,
Pentegra shall be entitled to offset the amount of damages incurred by it as
a result of such breach of warranty, representation, covenant or agreement
against any amounts payable by Pentegra, including the amounts payable under
the Service Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of
Contributor or Shareholder contained in this Agreement or in any certificate
or other document executed and delivered by Contributor or any Shareholder
pursuant to this Agreement is or becomes untrue or breached in any material
respect or if Contributor or any Shareholder fails to comply in any material
respect with any covenant or agreement contained herein, and any such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;
(c) at any time by Contributor or any Shareholder if any representation
or warranty of Pentegra contained in this Agreement or in any certificate or
other document executed and delivered by Pentegra pursuant to this Agreement
is or becomes untrue or breached in any material respect or if Pentegra fails
to comply in any material respect with any covenant or agreement contained
herein and such misrepresentation, noncompliance or breach is not cured,
waived or eliminated within twenty (20) days after receipt of written notice
thereof;
(d) by Pentegra, Shareholders or Contributor if the transaction
contemplated hereby shall not have been consummated by December 31, 1997; or
<PAGE>
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Contributor, that such termination
is desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Contributor shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares
of Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer
shall be treated as effective for any purpose or (b) engage in any
transaction, whether or not with respect to any shares of Pentegra Common
Stock or any interest therein, the intent or effect of which is to reduce the
risk of owning shares of Pentegra Common Stock. The certificates evidencing
the Pentegra Common Stock delivered to Contributor pursuant to the terms
hereof will bear a legend substantially in the form set forth below and
containing such other information as Pentegra may deem necessary or
appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Shareholders
acknowledge that the shares of Pentegra Common Stock to be delivered to
Contributor pursuant to this Agreement have not been and will not be
registered under the Securities Act of 1933 and may not be resold without
compliance with the Securities Act of 1933. The Pentegra Common Stock to be
acquired by Contributor pursuant to this Agreement is being acquired solely
for its own account, for investment purposes only and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution. Contributor covenants, warrants and represents that
none of the shares of Pentegra Common Stock issued to it will be offered,
sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
except after full compliance with all of the applicable provisions of the
Securities Act, as amended, and the rules and regulations of the Securities
Exchange Commission and applicable state securities laws and regulations.
All certificates evidencing shares of Pentegra Common Stock shall bear the
following legend in addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock
shall bear any legend required by the securities or blue sky laws of any
state where Contributor resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Shareholders are
able to bear the economic risk of an investment in Pentegra Common Stock
acquired pursuant to this Agreement and can afford to sustain a total loss of
such investment and have such knowledge and experience in financial and
business matters that they are capable of evaluating the merits and risks of
the proposed investment and
<PAGE>
therefore have the capacity to protect their own interests in connection with
the acquisition of the Pentegra Common Stock. Contributor, Shareholders and
their representatives have had an adequate opportunity to ask questions and
receive answers from the officers of Pentegra concerning any and all matters
relating to the background and experience of the officers and directors of
Pentegra, the plans for the operations of the business of Pentegra, and any
plans for additional acquisitions and the like. Contributor, Shareholders
and their representatives have asked any and all questions in the nature
described in the preceding sentence and all questions have been answered to
their satisfaction. Contributor and Shareholders are "accredited investors"
as defined in Regulation D of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Contributor and Shareholders agree that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally
through no fault of Contributor or Shareholders, (ii) disclosure is required
by law or the order of any governmental authority under color of law,
provided, that prior to disclosing any information pursuant to this clause
(ii), Contributor and Shareholders shall, if possible, give prior written
notice thereof to the other parties hereto, and provide such other parties
hereto with the opportunity to contest such disclosure, (iii) Contributor and
Shareholders reasonably believe that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party, or
(iv) Contributor and Shareholders are the sole and exclusive owner of such
confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Contributor or Shareholders of the provisions of this SECTION 13, Pentegra
shall be entitled to an injunction restraining Contributor and Shareholders
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Pentegra from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. The obligations of the parties under this SECTION 13 shall
survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement, together with the transactions contemplated by the Other
Agreement and the Initial Public Offering, will qualify as an exchange
meeting the requirements of Section 351 of the Code. The tax returns (and
schedules thereto) of Shareholders, Contributor and Pentegra shall be filed
in a manner consistent with such intention and Contributor and Pentegra shall
each provide the other with such tax information, reports, returns or
schedules as may be reasonably required to assist the other in so reporting
the transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
<PAGE>
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Contributor or Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Contributor or any Shareholder for
services rendered in connection with negotiating and closing the transactions
contemplated by this Agreement or the documents to be executed in connection
herewith, whether or not such costs or expenses are incurred before or after
the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Contributor.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF
CONTRIBUTOR AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS
PRINCIPLES.
<PAGE>
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one and the
same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and
shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Contributor, be relieved from its
obligations to Contributor under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand,
or Contributor, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Contributor and Pentegra as of the Closing Date, and the
prorated amount due Pentegra shall be credited to the cash portion of the
Purchase Consideration. Upon payment by Pentegra of such taxes actually
assessed and paid on the Assets, Pentegra shall calculate the apportionment
of such taxes and shall pay Contributor or may demand from Contributor, and
Contributor agrees to pay, the amount necessary to correct the estimate and
proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
<PAGE>
14.15 ARBITRATION. Upon the request of either Pentegra or the
Contributors or Shareholders (hereinafter referred to as a "Party"), whether
made before or after the institution of any legal proceeding, any dispute
among the parties hereto in any way arising out of, related to, or in
connection with this Agreement (hereinafter a "Dispute"), shall be resolved
by binding arbitration in accordance with the terms of this Section
(hereinafter the "Arbitration Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or foreclosing upon any
personal property in which there has been granted a security interest or lien
by a Party in the Documents. In Disputes involving indebtedness or other
monetary obligations, each Party agrees that the other Party may proceed
against all liable persons, jointly and severally against one or more of
them, without impairing rights against other liable persons. Nor shall a
Party be required to join the principal obligor or any other liable persons
(e.g., sureties or guarantors) in any proceeding against a particular person.
A Party may release or settle with one or more liable persons as the Party
deems fit without releasing or impairing rights to proceed against any
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoenix,
Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have
<PAGE>
the power to award recovery of all costs and fees (including attorney's fees,
administrative fees, and arbitrators' fees) to the prevailing Party. This
Arbitration Program may be amended, changed, or modified only by a writing
which specifically refers to this Arbitration Program and which is signed by
all the Parties. If any term, covenant, condition or provision of the
Arbitration Program is found to be unlawful or invalid or unenforceable, such
illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or by
applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be found
to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
Ronnie Andress, D.D.S., Inc.
By: /s/ Ronnie Andress, D.D.S.
----------------------------------
Its: President
----------------------------------
PENTEGRA DENTAL GROUP, INC.
By: /s/ James L. Dunn, Jr.
----------------------------------
Its: Senior Vice-President
----------------------------------
/s/ Ronnie Andress, D.D.S.
--------------------------------------
Ronnie Andress, D.D.S., Shareholder
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment
Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
VICTOR H. BURDICK, D.D.S., P.C..,
and
VICTOR H. BURDICK, D.D.S.
<PAGE>
TABLE OF CONTENTS
PAGE
----
Section 1. TERMS OF THE REORGANIZATION
1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . 2
1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . 4
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . 5
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . 6
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . 9
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . 11
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.17 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . 12
4.18 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . 12
4.19 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . 12
4.20 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . 12
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . 12
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . 12
Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . 13
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . 13
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . 13
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . 13
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . 13
7.7 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . 13
7.8 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . 14
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . 14
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . 14
Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . 14
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . 14
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . 14
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . 14
<PAGE>
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . 15
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . 16
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . 17
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . 18
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . 19
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . 20
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . 20
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . 21
14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . 21
14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . 21
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . 22
14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . 22
14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . 22
14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . 22
14.12 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . 22
14.13 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.14 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . 22
14.15 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . 23
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and
executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra"), VICTOR H. BURDICK, D.D.S., P.C., a Colorado
professional corporation ("Company") and VICTOR H. BURDICK, D.D.S., the sole
shareholder of the Company (referred to herein as "Shareholder" or
"Shareholders").
WITNESSETH:
WHEREAS, Company operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, the Boards of Directors of the Company and Pentegra have
determined that a reorganization between each of them is in the best interests
of their respective companies;
WHEREAS, Pentegra or its affiliated designee has entered into or intends to
enter into Agreements and Plans of Reorganization, Asset Contribution Agreements
and other acquisition agreements (collectively, the "Other Agreements") with
such persons or entities or the stockholders of such entities listed on EXHIBIT
A (together with Company, the "Target Companies") and simultaneously with the
closing of the reorganization contemplated herein, intends to consummate its
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock");
WHEREAS, it is intended for Federal income tax purposes that the
reorganization contemplated by this Agreement shall qualify as an reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE REORGANIZATION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock
is consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".
1.2 MERGER. Subject to and upon the terms and conditions contained
herein, on the Closing Date, the Company shall be merged with and into Pentegra
(or its permitted designated affiliate, in which case, the references herein to
Pentegra shall be to such designated affiliate and its shares of common stock)
in
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accordance with this Agreement and the separate corporate existence of the
Company shall thereupon cease ("Merger"). Pentegra shall be the surviving
corporation in the Merger ("Surviving Corporation") and shall continue to be
governed by the laws of the State of Delaware and the separate corporate
existence of Pentegra with all rights, privileges, powers, immunities and
purposes shall continue unaffected by the Merger. The Merger shall have the
effects specified in the Delaware General Corporation Law and the Colorado
Business Corporation Law. If all the conditions to the Merger set forth herein
shall have been fulfilled or waived in accordance herewith and this Agreement
shall not have been terminated in accordance herewith, the parties hereto shall
cause to be properly executed and filed on the Closing Date Certificates of
Merger for the Company meeting the applicable legal requirements. The Mergers
shall become effective on the Closing Date or the filing of such documents, in
accordance with applicable law, or at such later time as the parties hereto have
agreed upon and designated in such merger filings.
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of
Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation
and Bylaws of the Surviving Corporation until duly amended in accordance with
their terms.
1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra
immediately prior to the effective date of the Merger shall be the directors of
the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
Bylaws. The persons who are officers of Pentegra immediately prior to the
effective date of the Merger shall be the officers of the Surviving Corporation
and shall hold their respective offices until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal.
1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and
without any action on the part of the holder thereof, all shares of the
Company's common stock issued and outstanding on the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired and
shall cease to exist, and each holder of a certificate of representing shares of
Company common stock shall thereafter cease to have any rights with respect to
such shares except the right to receive the consideration set forth on ANNEX I
attached hereto (the "Merger Consideration"). Each share of common stock of
the Company held in treasury at the effective date of the Merger shall cease to
be outstanding and shall be cancelled and retired without payment of any
consideration therefor. On the effective date of the Merger, each share of
Pentegra Common Stock issued and outstanding shall, by virtue of he Mergers, and
without any action on the part of the holder thereof, continue unchanged and
remain outstanding as a share of validly issued, fully paid and nonassessable
share of Surviving Corporation common stock.
1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger,
the Shareholders, as the holders of a certificate or certificates representing
shares of Company common stock shall, upon surrender of such certificate or
certificates, receive the Merger Consideration, and until the certificate or
certificates of Company common stock shall have been surrendered by the
Shareholder and replaced by a certificate or certificates representing Pentegra
Common Stock (as set forth on ANNEX I), the certificate or certificates of
Company common stock shall, for all purposes be deemed to evidence ownership of
the number of shares of Pentegra Common Stock determined in accordance with the
provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the
Shareholders in the Merger shall be deemed for all purposes to have been issued
by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at
Closing the certificate or certificates representing the Company common stock
owned by them, duly endorsed in blank by the Shareholders, or accompanied by
duly executed blank stock powers, and with all necessary transfer tax and other
revenue stamps, acquired at the Shareholder's expense, affixed and cancelled.
1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or
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desirable to vest, perfect or confirm of record or otherwise in Pentegra its
right, title or interest in, to or under any of the Assets (defined as those
assets to be owned by the Company on the date of Closing, excluding those
assets described in Exhibit 4.16), or otherwise to carry out this Agreement,
in return for the consideration set forth in this Agreement, the Company and
Shareholders shall excecute and deliver all such deeds, bills of sale,
assignments and assurances and take and do all such other actions and things
as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under the Assets in Pentegra or
otherwise to carry out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional
corporation or association, as applicable, duly organized, validly existing and
in good standing under the laws of the State of Colorado. Company has all
necessary corporate powers to own all of its assets and to carry on its business
as such business is now being conducted. Company does not own stock in or
control, directly or indirectly, any other corporation, association or business
organization, nor is Company a party to any joint venture or partnership. The
Shareholders are the sole shareholders of Company and own all outstanding shares
of capital stock free of all security interests, claims, encumbrances and liens
in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock
has been legally and validly issued and fully paid and nonassessable. No shares
of capital stock of Company are owned by Company in treasury. There are no
outstanding (a) bonds, debentures, notes or other obligations the holders of
which have the right to vote with the stockholders of Company on any matter, (b)
securities of Company convertible into equity interests in Company, or (c)
commitments, options, rights or warrants to issue any such equity interests in
Company, to issue securities of Company convertible into such equity interests,
or to redeem any securities of Company. No shares of capital stock of Company
have been issued or disposed of in violation of the preemptive rights, rights of
first refusal or similar rights of any of Company's stockholders. Company is
not required to qualify to do business as a foreign corporation in any other
state or jurisdiction by reason of its business, properties or activities in or
relating to such other state or jurisdiction. Company does not have any assets,
employees or offices in any state other than the state set forth in the first
sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power
to execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all action required by
law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to
authorize the execution, delivery and performance of this Agreement and such
related documents. Each Shareholder has the legal capacity to enter into and
perform this Agreement and the other agreements to be executed and delivered in
connection herewith. Company has obtained the approval of its stockholders
necessary to the consummation of the transactions contemplated herein. This
Agreement and all agreements and documents executed and delivered in connection
herewith have been, or will be as of the Closing Date, duly executed and
delivered by Company and Shareholders, as appropriate, and constitute or will
constitute the legal, valid and binding obligations of Company and Shareholders,
enforceable against Company and Shareholders in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of consents
described on EXHIBIT 2.4, the consummation of the actions contemplated hereby
will not, violate any provision of the Articles or Certificate of Incorporation
or Bylaws of Company or any provisions of, or result in the acceleration of, any
obligation under any mortgage, lien, lease, agreement, rent, instrument, order,
arbitration award, judgment or decree to which Company or any Shareholder is a
party or by which Company or any
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Shareholder is bound, or violate any material restrictions of any kind to
which Company is subject, or result in any lien or encumbrance on any of
Company's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets, or
waivers thereof, have been duly obtained and are in full force and effect and
are described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Company and Shareholders, threatened, which may result in the
revocation, cancellation or suspension, or any adverse modification, of any such
licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Company or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been declared or paid by Company on any of its capital stock
since the Balance Sheet Date. No repurchase of any of Company's capital stock
has been approved, effected or is pending, or is contemplated by Company.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Company and all amendments
thereto have been delivered to Pentegra. The minute books of Company contain
accurate minutes of all meetings of and consents to actions taken without
meetings of the Board of Directors and stockholders of Company since its
formation. The books of account of Company have been kept accurately in the
ordinary course of business and the revenues, expenses, assets and liabilities
of Company have been properly recorded in such books.
2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior one full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any related
unaudited statements of income, retained earnings, schedule of accounts
receivable, accounts payable and accrued liabilities, and cash flows for the
twelve months then ended (collectively, with the related notes thereto, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and results of operations of Company as of the dates and for the
periods indicated and reflect all fixed and contingent liabilities of Company.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Company or any Shareholder leases, as lessor or lessee, real
or personal property used in operating the Business, related to the Assets or
otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in
accordance with their respective terms, and there is not under any such lease
any existing default by Company, as lessor or lessee, or any condition or event
of which any Shareholder or Company has knowledge which with notice or lapse of
time, or both, would constitute a default, in respect of which Company or
Shareholders have not taken adequate steps to cure such default or to prevent a
default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Company and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if
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any, which are set forth in EXHIBIT 2.10 attached hereto. Company shall
cause all encumbrances set forth on EXHIBIT 2.10 (other than those
encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior
to the Closing Date and evidence of such releases of liens and claims shall
be provided to Pentegra on the Closing Date and the Assets shall not be used
to satisfy such liens, claims or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned or
used by Company, are in good, current, standard and merchantable condition and
are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Company has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Company, including the names of any entities from whom Company previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Company in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Company has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on
EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this
Agreement of: (a) the name of each director and officer of Company and the
offices held by each, (b) the most recent payroll report of Company, showing all
current employees of Company and their current levels of compensation, (c)
promised increases in compensation of employees of Company that have not yet
been effected, (d) oral or written employment agreements, consulting agreements
or independent contractor agreements (and all amendments thereto) to which
Company is a party, copies of which have been delivered to Pentegra, and (e) all
employee manuals, materials, policies, procedures and work-related rules, copies
of which have been delivered to Pentegra. Company is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Company has not engaged in any unfair labor practice.
There are no unfair labor practices charges or complaints pending or threatened
against Company, and Company has never been a party to any agreement with any
union, labor organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the Business
nor any of the Assets is subject to any pending, nor does Company or any
Shareholder have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Company, any Shareholder, the Business, the Assets or the transactions
contemplated by this Agreement, and, to the knowledge of Company and
Shareholders, no basis for any such action exists, nor is there any legal
impediment of which Company or any Shareholder has knowledge to the continued
operation of its business or the use of the Assets in the ordinary course,
subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Company has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts, obligations
and commitments of Company ("Contracts"), entered into in connection with and
related to the Assets or the Business, all of which are listed or incorporated
by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case
of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than
leases) attached hereto. Except as otherwise indicated on such Exhibits, all of
such Contracts are valid, binding and enforceable in accordance with their terms
and are
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in full force and effect, and no defenses, offsets or counterclaims have
been asserted or may be made by any party thereto. Except as indicated on such
Exhibits, there is not under any such Contract any existing default by Company
or any Shareholder, or any condition or event of which Company or any
Shareholder has knowledge which with notice or lapse of time, or both, would
constitute a default. Company and Shareholders have no knowledge of any
default by any other party to such Contracts. Company and Shareholders have not
received notice of the intention of any party to any Contract to cancel or
terminate any Contract and have no reason to believe that any amendment or
change to any Contract is contemplated by any party thereto. Other than those
contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and
EXHIBIT 2.15, Company are not a party to any material written or oral agreement
contract, lease or arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product or
service;
(h) Loan agreement or other contract for money borrowed or lent or to
be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of the
Company or Shareholders, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Company on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) or entered into any contract, lease, license or
commitment, except in connection with the performance of this Agreement or
except in the ordinary course of business;
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued, contingent
or otherwise) other than (i) liabilities shown or reflected on the Balance
Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary
course of business;
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(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(d) Made any payments to or loaned any money to any person or entity
other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have been
required due to income or operations of Company since the Balance Sheet Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants or
agents, or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of any officer, employee, consultant or agent;
(j) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties, assets
or business or the Business or the Assets, or experienced any other material
adverse change in its financial condition, assets, prospects, liabilities or
business;
(n) Declared or paid a distribution, payment or dividend of any kind
on the capital stock of Company;
(o) Repurchased, approved any repurchase or agreed to repurchase any
of Company's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Company has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it. All such tax returns are complete and accurate in all respects and
properly reflect the relevant taxes for the periods covered thereby. Company
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Company. There are no audits relating to taxes of
Company pending or in process or, to the knowledge of Company, threatened.
Company is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of
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time within which to file any tax return or to pay any tax assessment or
deficiency. There are no liens or encumbrances relating to taxes on or
threatened against any of the assets of Company. Company has withheld and
paid all taxes required by law to have been withheld and paid by it. Neither
Company nor any predecessor of Company is or has been a party to any tax
allocation or sharing agreement or a member of an affiliated group of
corporations filing a consolidated Federal income tax return. Company has
delivered to Pentegra correct and complete copies of Company's one most
recently filed annual state, local and Federal income tax returns, together
with all examination reports and statements of deficiencies assessed against
or agreed to by Company during the three calendar year period preceding the
date of this Agreement. Company has neither made any payments, is obligated
to make any payments, or is a party to any agreement that under any
circumstance could obligate it to make any payments that will not be
deductible under Code section 280G.
(b) No Shareholder presently intends to dispose of any of the shares of
Pentegra Common Stock to be received hereunder nor is a party to any plan,
arrangement or agreement for the disposition of such shares. Company and
Shareholders have no knowledge, after due inquiry, of any such intent, plan,
arrangement or agreement by any Shareholder. Nothing contained herein shall
prohibit Shareholders from selling such shares of Pentegra Common Stock after
the designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated by
this Agreement which may be now or hereafter asserted against Pentegra, Company
or Company's shareholders resulting from any action taken by Company or any
Shareholder or their respective agents or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against
on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and
has not incurred since that date and will not have incurred as of the Closing
Date, any liabilities or obligations of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, other than those
incurred in the ordinary course of business or as set forth on EXHIBIT 2.16.
Company and Shareholders do not know, or have reasonable grounds to know, of any
basis for the assertion against Company or any Shareholder as of the Balance
Sheet Date, of any claim or liability of any nature in any amount not fully
reflected or reserved against on the Balance Sheet, or of any claim or liability
of any nature arising since that date other than those incurred in the ordinary
course of business or contemplated by this Agreement. All indebtedness of
Company (including without limitation, indebtedness for borrowed money,
guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached
hereto.
2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed
professional of Company carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the industry.
Valid and enforceable policies in such amounts are outstanding and duly in force
and will remain duly in force through the Closing Date. All such policies are
described in EXHIBIT 2.20 attached hereto and true and correct copies have been
delivered to Pentegra. Neither Shareholders nor Company have received notice
or other communication from the issuer of any such insurance policy cancelling
or amending such policy or threatening to do so. Neither Company, nor any
Shareholder nor any licensed professional employee of Company has any
outstanding claims, settlements or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached
hereto, Company has neither established, nor maintains, nor is obligated to make
contributions to or under or otherwise participate in, (a) any bonus or other
type of compensation or employment plan, program, agreement, policy, commitment,
contract or arrangement (whether or not set forth in a written document); (b)
any pension, profit-sharing, retirement or other plan, program or arrangement;
or (c) any other employee benefit plan, fund
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or program, including, but not limited to, those described in SECTION 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
All such plans listed on EXHIBIT 2.20 (individually "Company Plan," and
collectively "Company Plans") have been operated and administered in all
material respects in accordance with all applicable laws, rules and
regulations, including without limitation, ERISA, the Internal Revenue Code
of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment
Act of 1967, as amended, and the related rules and regulations adopted by
those Federal agencies responsible for the administration of such laws. No
act or failure to act by Company has resulted in a "prohibited transaction"
(as defined in ERISA) with respect to the Company Plans. No "reportable
event" (as defined in ERISA) has occurred with respect to any of the Company
Plans. Company has not previously made, is not currently making, and is not
obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Company Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at least equal to the
value of plan liabilities or (ii) the value of plan liabilities in excess of
plan assets is disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing
Date, a party to any agreement or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree, rule or
regulation that materially and adversely affects the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Company,
the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's
licensed professional employees, and the conduct of the Business and use of the
Assets, have complied with all applicable laws, rules, regulations and licensing
requirements, including, without limitation, the Federal Environmental
Protection Act, the Occupational Safety and Health Act, the Americans with
Disabilities Act and any environmental laws and medical waste laws, and there
exist no violations by Company, any Shareholder or any licensed professional
employee of Company of any Federal, state or local law or regulation. Company
and Shareholders have not received any notice of a violation of any Federal,
state and local laws, regulations and ordinances relating to the operations of
the Business and Assets and no notice of any pending inspection or violation of
any such law, regulation or ordinance has been received by Company.
2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed
professional employee or independent contractor of Company has timely filed all
claims or other reports required to be filed with respect to the purchase of
services by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are no
pending appeals, overpayment determinations, adjustments, challenges, audit,
litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Company, any Shareholder
and each licensed professional employee of Company. Neither Company, nor any
Shareholder, nor any licensed professional employee of Company has been
convicted of, or pled guilty or nolo contendere to, patient abuse or negligence,
or any other Medicare or Medicaid program related offense and none has committed
any offense which may serve as the basis for suspension or exclusion from the
Medicare and Medicaid programs or any other third party payor program. With
respect to payors, Company, Shareholders and Company's licensed professional
employees has not (a) knowingly and willfully making or causing to be made a
false statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in determining
rights to any benefit or payment; (c) failed to disclose knowledge of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company
or Shareholders in this Agreement, and no Exhibit or certificate issued or
executed by, or information furnished by, officers or
<PAGE>
directors of Company or any Shareholder and furnished or to be furnished to
Pentegra pursuant hereto, or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
or facts contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Company has with any bank or other
financial institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Company, or their respective spouses,
children or affiliates, owns directly or indirectly, on an individual or joint
basis, any interest in, has a compensation or other financial arrangement with,
or serves as an officer or director of, any customer or supplier or competitor
of Company or any organization that has a material contract or arrangement with
Company.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of
the names and addresses of each payor of Company's services which accounted for
more than 10% of revenues of Company in the preceding fiscal year. Company has
good relations with all such payors and other material payors of Company and
none of such payors has notified Company that it intends to discontinue its
relationship with Company or to deny any claims submitted to such payor for
payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Company and Shareholders as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions required
by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize
the execution, delivery and performance of this Agreement and such related
documents. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing Date,
duly executed and delivered by Pentegra and constitute or will constitute the
legal, valid and binding obligations of Pentegra, enforceable against Pentegra
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and delivery
of this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and, the
consummation of the actions contemplated hereby will not, violate any provision
of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or decree
to which Pentegra is a party or by which Pentegra is bound, or violate any
material restrictions of any kind to which Pentegra is subject, or result in any
lien or encumbrance on any of Pentegra's assets. Other than as have been
obtained or as would not have a material adverse effect, there are no consents
of any person or entity required for the transaction contemplated hereby on
behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental
<PAGE>
authorizations and approvals required for the conduct of the business of
Penegra or waivers thereof, have been duly obtained and are in full force and
effect, except as would not have a material adverse effect upon Pentegra.
Other than as would not have a material adverse effect, there are no
proceedings pending or, to the knowledge of Pentegra, threatened, which may
result in the revocation, cancellation or suspension, or any adverse
modification, of any such licenses or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any pending,
nor does Pentegra have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Pentegra, its business, assets or the transactions contemplated by
this Agreement, and, to the knowledge of Pentegra, no basis for any such action
exists, nor is there any legal impediment of which Pentegra has knowledge to the
continued operation of its business or the use of its Assets in the ordinary
course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports and
other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it, other than as would not have a material adverse effect. Pentegra
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Pentegra. There are no audits relating to taxes of
Pentegra pending or in process or, to the knowledge of Pentegra, threatened.
Pentegra is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the reorganization contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the reorganization contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra
in this Agreement, the Private Placement Memorandum to be delivered by Pentegra,
and no Exhibit or certificate issued by officers or directors of Pentegra and
furnished or to be furnished to Company or any Shareholder pursuant hereto, or
in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements or facts contained therein not
misleading.
SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, agree that between the
date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall
use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Company and
Shareholders agree to complete the Exhibits hereto to be provided by them in
form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the
Business and use the Assets in the ordinary course. Company and Shareholders
shall not enter into any lease, contract, indebtedness, commitment, purchase or
sale or acquire or dispose of any capital asset relating to the Business
<PAGE>
or the Assets except in the ordinary course of business. Company and
Shareholders shall use their best efforts to preserve the Business and Assets
intact and shall not take any action that would have an adverse effect on the
Business or Assets. Company and Shareholders shall use their best efforts to
preserve intact the relationships with payors, customers, suppliers, patients
and others having significant business relations with Company. Company and
Shareholders shall collect its receivables and pay its trade payables in the
ordinary course of business. Company and Shareholdes shall not introduce any
new method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and
its authorized representatives upon reasonable advance notice, access to, and
make available for inspection, all of the assets and business of Company, the
Business and the Assets, including employees, customers and suppliers and permit
Pentegra and its authorized representatives to inspect and make copies of all
documents, records and information with respect to the business or assets of
Company, the Business or the Assets as Pentegra or its representatives may
request. Company and Shareholders shall promptly notify Pentegra in writing of
(a) any notice or communication relating to a default or event that, with notice
or lapse of time or both, could become a default, under any contract, commitment
or obligation to which Company is a party or relating to the Business or the
Assets, and (b) any adverse change in Company's or the Business' financial
condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and
Shareholders shall use their best efforts to secure all necessary approvals and
consents of third parties to the consummation of the transactions contemplated
hereby, including consents described on EXHIBIT 2.4. Company and Shareholders
shall use their best efforts to obtain all licenses, permits, approvals or other
authorizations required under any law, rule, regulation, or otherwise to provide
the services of the Practice contemplated by the Service Agreement and to
conduct the intended business of the Practice and operate the Business and use
the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of Closing or the termination of this Agreement in accordance with the
provisions hereof, Company and Shareholders shall not, and shall use its best
efforts to cause Company's employees, agents and representatives not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer, including without limitation,
any proposal or offer to any Shareholder, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of Company or engage
in any negotiations concerning, or provide any confidential information or data
to, or have any discussions with, any person relating to such proposal or offer,
and Company and Shareholders will immediately cease any such activities,
discussions or negotiations heretofore conducted with respect to any of the
foregoing. Company and Shareholders shall immediately notify Pentegra if any
such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund completely
for any accrued benefits, where applicable, or vested accrued benefits for which
Company or any entity might have any liability whatsoever arising from any
insurance, pension plan, employment tax or similar liability of Company to any
employee or other person or entity (including, without limitation, any Company
Plan and any liability under employment contracts with Company) allocable to
services performed prior to the Closing Date. Company and Shareholders
acknowledge that the purpose and intent of this covenant is to assure that
Pentegra shall have no unfunded liability whatsoever at any time after the
Closing Date with respect to any of Company's employees or similar persons or
entities, including, without limitation, any Company Plan for the period prior
to the Closing Date.
4.7 EMPLOYEE MATTERS. Company shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of any Shareholder (other than in the ordinary course of business) or other
employee or an independent contractor of Company, adopt, amend or terminate
<PAGE>
any compensation plan, employment agreement, independent contractor
agreement, employee policies and procedures or employee benefit plan, take
any action that could deplete the assets of any employee benefit, or fail to
pay any premium or contribution due or file any report with respect to any
employee benefit plan, or take any other actions with respect to its
employees or employee matters which might have an adverse effect upon
Company, its business, assets or prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Company, nor will any repurchase of any
of Company's capital stock be approved or effected, except distribution of those
assets described in Exhibit 4.16.
4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall
use their best efforts to take, or cause to be taken, all actions necessary to
effect the reorganization contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change
in any material respect the tax or financial accounting methods or practices
followed by Company (including any material change in any assumption underlying,
or any method of calculating, any bad debt, contingency or other reserve),
except as may be required by law or generally accepted accounting principles.
Company and Shareholders will duly, accurately and timely (without regard to any
extensions of time) file all returns, information statements and other documents
relating to taxes of Company required to be filed by it, and pay all taxes
required to be paid by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Company hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Company and Shareholders covenant and agree that all of the
creditors with respect to the Business and the Assets will be paid in full by
Company prior to the Closing Date, except to extent that any liability to such
creditors is assumed by Pentegra pursuant to this Agreement or as described in
Exhibit 4.16. If required by Pentegra, Company and Shareholders shall furnish
Pentegra with proof of payment of all creditors with respect to the Business and
the Assets. Notwithstanding the foregoing, Company and Shareholders may dispute
the validity or amount of any such creditor's claim without being deemed to be
in violation of this SECTION 4.11, provided that such dispute is in good faith
and does not unreasonably delay the resolution of the claim and provided,
further that Company and Shareholders agree to indemnify and bond Pentegra for
such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Company leases any of its premises from any Shareholder or
other affiliate of Company or any shareholder of Company, Pentegra shall have
entered into a building lease (the "Building Lease") with the owner of such
premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, (i) a five year initial
term plus three five-year renewal options, (ii) a lease rate equal to the fair
market value lease rate, as agreed to by Pentegra, and (iii) such other
provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with
all requests made by Pentegra for the purpose of allowing Pentegra to hire those
non-dentist employees of Company designated by Pentegra, such employment to be
effective as of the Closing Date. Notwithstanding the above, Company and
Shareholders shall remain liable under any Company Plans for any claims incurred
by any employees or their spouses or dependents, and for all compensation,
bonuses, benefits and other such items and other liabilities related to
Company's employees incurred by Company prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all
employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be
treated as "leased employees" (as defined in Code Section 414(n)) of Company and
shall be treated as Clinic employees for purposes of eligibility and
participation in Company Plans.
<PAGE>
4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective as
of the Closing Date.
4.16 [INTENTIONALLY DELETED]
4.17 [INTENTIONALLY DELETED]
4.18 [INTENTIONALLY DELETED]
4.19 [INTENTIONALLY DELETED]
4.20 [INTENTIONALLY DELETED]
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS.
Pentegra, Shareholders and Company agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall
cooperate to promptly prepare and file with the Securities Exchange Commission
("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to
be filed by Pentegra in connection with its Initial Public Offering (including
the prospectus constituting a part thereof, the "Registration Statement") and
Pentegra shall use its best efforts to obtain an effective date for the
Registration Statement. Pentegra shall obtain all necessary state securities
laws or "Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Agreement and the Company and Shareholders shall furnish
all information concerning Company and Shareholders as may be reasonable
requested in connection with any such action.
Company and Shareholder represent and warrant that none of the information
or documents supplied or to be supplied by it specifically for inclusion in the
Registration Statement, by exhibit or otherwise, will, at the time the
Registration Statement and each amendment or supplement thereto, if any, becomes
effective under the Securities Act of 1933, 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, in light of the circumstances under
which they were made, not misleading. Company and Shareholders shall be
entitled to review the Registration Statement and each amendment thereto, if
any, prior to the time each becomes effective under the Securities Act of 1933.
Company and Shareholders shall furnish Pentegra will all information
concerning themselves, their
<PAGE>
subsidiaries, if any, directors, officers and stockholders and such other
matters as may be reasonable requested by Pentegra in connection with the
preparation of the Registration Statement and each amendment or supplement
thereto, or any other statement, filing, notice or application made by or on
behalf of each such party or any of its subsidiaries to any governmental
entity in connection with the transactions contemplated by the Other
Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at or
prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Company and Shareholders contained herein shall have been true and correct in
all respects when initially made and shall be true and correct in all respects
as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Company and Shareholders prior to
the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Company shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Company, the Business and the Assets, the results of which shall
be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 [INTENTIONALLY DELETED]
7.8 [INTENTIONALLY DELETED]
7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained
all necessary government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly
executed in form satisfactory to Pentegra and its counsel, referred to in
SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or
payables between Company and its shareholders or affiliates and Company shall
not have any liabilities, including indebtedness, guaranties and capital leases,
that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an
additional insured on their liability insurance program in accordance with
SECTION 4.15.
<PAGE>
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Company since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Company and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Pentegra contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.3.1 NO ADVERSE CHANGE. No material adverse change in the condition
(financial or otherwise), operation, assets, liabilities, business or prospects
of Pentegra shall have occurred since the date of the Private Placement
Memorandum, including the pro forma financial information.
8.4 CLOSING DELIVERIES. Company shall have received all documents, duly
executed in form satisfactory to Company and its counsel, referred to in SECTION
9.2.
8.5 SECURITIES APPROVAL. 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
and closing shall have occurred with the underwriter in the IPO. At or prior to
the date that the Registration Statement is declared effective by the SEC,
Pentegra shall have received all state securities and "Blue Sky" permits
necessary to consummate the transactions contemplated hereby. The Pentegra
Common Stock shall have been approved for listing on Nasdaq or other exchange
selected by Pentegra, subject only to official notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days
after requested by Pentegra, Company and Shareholders shall deliver to Pentegra
the following, all of which shall be in a form satisfactory to counsel to
Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in
<PAGE>
escrow pending Closing, pursuant to an escrow agreement or letter agreement in
form and substance mutually acceptable to the parties hereto:
(a) [intentionally deleted];
(b) [intentionally deleted];
(c) a copy of the resolutions of the Board of Directors of Company
authorizing the execution, delivery and performance of this Agreement and all
related documents and agreements each certified by the Secretary as being true
and correct copies of the original thereof;
(d) executed merger certificate and/or plan as required by applicable
state law;
(e) [intentionally deleted];
(f) certificates of the Shareholders and a duly authorized officer of
Company dated as of the Closing Date, (i) as to the truth and correctness of the
representations and warranties of Company and Shareholder contained herein; (ii)
as to the performance of and compliance by Company and Shareholder with all
covenants contained herein; and (iii) certifying that all conditions precedent
of Company and Shareholders to the Closing have been satisfied;
(g) a certificate of the Secretary of Company certifying as to the
incumbency of the directors and officers of Company and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Company;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Company and any state of required
foreign qualification of Company establishing that Company is in existence and
is in good standing to transact business in its state of incorporation;
(i) an opinion of counsel to Company and Shareholder opining as to
the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Company, the enforceability of this Agreement and the other agreements and
documents to be executed in connection herewith, and other matters reasonably
requested by Pentegra;
(j) non-foreign affidavits executed by Company;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement and
any other instruments and agreements reasonably requested by Pentegra in
connection with any service arrangements to be provided by Pentegra to
Shareholder.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall
deliver to Company and Shareholders, the following, all of which shall be in a
form satisfactory to counsel to Company and Shareholders and shall be held by
Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing,
pursuant to an escrow agreement or letter agreement in form and substance
mutually acceptable to
<PAGE>
the parties hereto:
(a) the Merger Consideration;
(b) [intentionally deleted];
(c) [intentionally deleted];
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance of
this Agreement and all related documents and agreements each certified by the
Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii) certifying
that all conditions precedent of Pentegra to the Closing have been satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and the
State of incorporation of Company;
(h) an opinion of counsel to Pentegra opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Pentegra, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Company;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Company to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in
any Exhibit attached hereto, any agreement executed pursuant hereto, and any
certificate executed and delivered by any party pursuant to the terms of this
Agreement, shall constitute representations and warranties of Company and
Shareholders, jointly and severally, or of Pentegra, as the case may be. All
such representations and warranties, and all representations and warranties
expressly labeled as such in this Agreement shall survive the date of this
Agreement and the Closing Date for a period of five (5) years following the
Closing Date, except that (i) the representations and warranties with respect to
environmental and medical waste laws and health care laws and matters shall
survive for a period of fifteen (15) years and tax representations shall survive
until one year after the expiration of the applicable statute of limitations.
Each party covenants with the other parties not to make any claim with respect
to such representations and warranties, against any party after the date on
which such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless
such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4
hereof, as the case may be. Each party hereby releases, acquits and
<PAGE>
discharges the other party from any and all claims and demands, actions and
causes of action, damages, costs, expenses and rights of setoff with respect
to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable,
are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2
AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS
FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS,
COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES
AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY
PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF,
OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR
TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3
AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND
SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS,
DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND
EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH
RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY,
<PAGE>
AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO
BE FURNISHED BY INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER
THE CLOSING DATE,
(D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL
LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION
ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS
RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER
THE CLOSING DATE,
(E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY
RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A
RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE
NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND
PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS
SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION
STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR
SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED
OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS
SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
<PAGE>
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the defense
of such action or proceeding, such Indemnified Person shall notify Indemnitor
thereof. If any such action or other proceeding shall be brought against any
Indemnified Person, Indemnitor shall, upon written notice given within a
reasonable time following receipt by Indemnitor of such notice from Indemnified
Person, be entitled to assume the defense of such action or proceeding with
counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person;
provided, however, that any Indemnified Person may at its own expense retain
separate counsel to participate in such defense. Notwithstanding the foregoing,
Indemnified Person shall have the right to employ separate counsel at
Indemnitor's expense and to control its own defense of such action or proceeding
if, in the reasonable opinion of counsel to such Indemnified Person, (a) there
are or may be legal defenses available to such Indemnified Person or to other
Indemnified Persons that are different from or additional to those available to
Indemnitor and which could not be adequately advanced by counsel chosen by
Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor
and such Indemnified Person that would make such separate representation
advisable; provided, however, that in no event shall Indemnitor be required to
pay fees and expenses hereunder for more than one firm of attorneys of
Indemnified Person in any jurisdiction in any one action or proceeding or group
of related actions or proceedings. Indemnitor shall not, without the prior
written consent of any Indemnified Person, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding to which such Indemnified Person is a party unless such settlement,
compromise or consent includes an unconditional release of such Indemnified
Person from all liability arising or potentially arising from or by reason of
such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Company or any Shareholder giving rise
to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be
entitled to offset the amount of damages incurred by it as a result of such
breach of warranty, representation, covenant or agreement against any amounts
payable by Pentegra hereunder or under any other agreements executed between
Pentegra and Shareholder.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Company
or any Shareholder contained in this Agreement or in any certificate or other
document executed and delivered by Company or any Shareholder pursuant to this
Agreement is or becomes untrue or breached in any material respect or if Company
or any Shareholder fails to comply in any material respect with any covenant or
agreement contained herein, and any such misrepresentation, noncompliance or
breach is not cured, waived or eliminated within twenty (20) days after receipt
of written notice thereof;
(c) at any time by Company or any Shareholder if any representation or
warranty of Pentegra contained in this Agreement or in any certificate or other
document executed and delivered by Pentegra pursuant to this Agreement is or
becomes untrue or breached in any material respect or if Pentegra fails to
comply in any material respect with any covenant or agreement contained herein
and such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra, Shareholders or Company if the transaction contemplated
hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Company, that such termination is
desirable and in the best interests of Pentegra.
<PAGE>
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date,
Shareholder shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of
Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer shall
be treated as effective for any purpose or (b) engage in any transaction,
whether or not with respect to any shares of Pentegra Common Stock or any
interest therein, the intent or effect of which is to reduce the risk of owning
shares of Pentegra Common Stock. The certificates evidencing the Pentegra
Common Stock delivered to Company pursuant to the terms hereof will bear a
legend substantially in the form set forth below and containing such other
information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the
shares of Pentegra Common Stock to be delivered to Company pursuant to this
Agreement have not been and will not be registered under the Securities Act of
1933 and may not be resold without compliance with the Securities Act of 1933.
The Pentegra Common Stock to be acquired by Shareholders pursuant to this
Agreement is being acquired solely for its own account, for investment purposes
only and with no present intention of distributing, selling or otherwise
disposing of it in connection with a distribution. Each Shareholder covenants,
warrants and represents that none of the shares of Pentegra Common Stock issued
to it will be offered, sold, assigned, pledged, hypothecated, transferred or
otherwise disposed of except after full compliance with all of the applicable
provisions of the Securities Act, as amended, and the rules and regulations of
the Securities Exchange Commission and applicable state securities laws and
regulations. All certificates evidencing shares of Pentegra Common Stock shall
bear the following legend in addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Company resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the
economic risk of an investment in Pentegra Common Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and
have such knowledge and experience in financial and business matters that they
are capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect their own interests in connection with
the acquisition of the Pentegra Common Stock. Shareholders and their
representatives have had an adequate opportunity to ask questions and receive
answers from the officers of Pentegra concerning any and all matters relating to
the background and experience of the officers and directors of Pentegra, the
plans for the operations of the business of Pentegra, and any plans for
additional
<PAGE>
acquisitions and the like. Shareholders and their representatives have asked
any and all questions in the nature described in the preceding sentence and
all questions have been answered to their satisfaction. Shareholders are
"accredited investors" as defined in Regulation D of the Securities Act of
1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Company and Shareholders agree that it will not disclose
such confidential information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, unless (i) such information
becomes available to or known by the public generally through no fault of
Company or Shareholders, (ii) disclosure is required by law or the order of any
governmental authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (ii), Company and Shareholders shall, if
possible, give prior written notice thereof to the other parties hereto, and
provide such other parties hereto with the opportunity to contest such
disclosure, (iii) Company and Shareholders reasonably believe that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party, or (iv) Company and Shareholders are the sole and exclusive
owner of such confidential information as a result of the transactions
contemplated hereunder or otherwise. In the event of a breach or threatened
breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra
shall be entitled to an injunction restraining Company and Shareholders from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting Pentegra from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
The obligations of the parties under this SECTION 13 shall survive the
termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement will qualify as a reorganization within the meaning of Section
368(a) of the Code. The tax returns (and schedules thereto) of Shareholders,
Company and Pentegra shall be filed in a manner consistent with such intention
and Shareholders and Pentegra shall each provide the other with such tax
information, reports, returns or schedules as may be reasonably required to
assist the other in so reporting the transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery, or by
facsimile AND overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
<PAGE>
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Company and Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this Agreement,
whether or not such transactions are consummated. Without limiting the
generality of the foregoing and whether or not such liabilities may be deemed to
have been incurred in the ordinary course of business, Pentegra shall not be
liable to or required to pay, either directly or indirectly, any fees and
expenses of legal counsel, accountants, auditors or other persons or entities
retained by Company or any Shareholder for services rendered in connection with
negotiating and closing the transactions contemplated by this Agreement or the
documents to be executed in connection herewith, whether or not such costs or
expenses are incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure, either
written or oral, regarding the transactions contemplated by this Agreement
without the prior written consent of the other party, provided that the
foregoing shall not prohibit any disclosure (a) by press release, filing or
otherwise that Pentegra has determined in good faith judgment to be required by
Federal securities laws or the rules of the National Association of Securities
Dealers, (b) to attorneys, accountants, investment bankers or other agents of
the parties assisting the parties in connection with the transactions
contemplated by this Agreement, and (c) by Pentegra in connection with the
conduct of its Initial Public Offering and conducting an examination of the
operations and assets of Company.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are
integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and not
only in connection with the specific representation in which they are explicitly
referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
<PAGE>
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one and the same
instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any entity
that, through one or more intermediaries is, controlled, controlled by or under
common control with, Pentegra. Upon any such assignment prior to the Closing,
all references herein to Pentegra (including those to Pentegra Common Stock)
shall be deemed to include references to the assignee and the assignee's common
stock. Notwithstanding any such assignment, Pentegra shall not, absent a
written release from Company, be relieved from its obligations to Company under
this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Company, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Company and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Company or may demand from Company, and Company agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing, and
signed by the parties hereto. The waiver of any of the terms and conditions of
this Agreement shall not be construed as a waiver of any other terms and
conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Companys or Shareholders (hereinafter referred to as a "Party"), whether made
before or after the institution of any legal proceeding, any dispute among the
parties hereto in any way arising out of, related to, or in connection with
this Agreement (hereinafter a "Dispute"), shall be resolved by binding
arbitration in accordance with the terms of this Section (hereinafter the
"Arbitration Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in accordance
with the terms of this Arbitration Program, the Commercial Arbitration Rules of
the AAA. In the event of any inconsistency between this Arbitration Program and
those rules
<PAGE>
or statutes, then the terms of this Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been completed
and the arbitrators have determined each party's post-arbitration obligations
and responsibilities as it relates to such warranties and covenants. No
provision of, nor the exercise of any rights under, this Arbitration Program
shall limit the right of any Party at any time to seek or use ancillary or
preliminary judicial or non-judicial self help remedies for the purposes of
obtaining, perfecting, preserving, or foreclosing upon any personal property in
which there has been granted a security interest or lien by a Party in the
Documents. In Disputes involving indebtedness or other monetary obligations,
each Party agrees that the other Party may proceed against all liable persons,
jointly and severally against one or more of them, without impairing rights
against other liable persons. Nor shall a Party be required to join the
principal obligor or any other liable persons (e.g., sureties or guarantors) in
any proceeding against a particular person. A Party may release or settle with
one or more liable persons as the Party deems fit without releasing or impairing
rights to proceed against any persons not so released. All statutes of
limitation that would otherwise be applicable shall apply to any arbitration
proceeding.
The party seeking arbitration shall notify the other Party, in writing, of
that Party's desire to arbitrate a dispute; and each Party shall, within twenty
(20) days from the date such notification is received, select an arbitrator, and
those two arbitrators shall select a third arbitrator within ten (10) days
thereafter. The issues or claims in dispute shall be committed to writing,
separately stated and numbered, and each party's proposed answers or contentions
shall be signed below the questions. Failure by a party to select an arbitrator
within the prescribed time period shall serve as that Party's acquiescence and
acceptance of the other party's selection of arbitrator. The arbitrators shall
resolve all Disputes in accordance with the applicable substantive law. Any
Dispute shall be decided by a majority vote of three arbitrators, unless the
claim or amount in controversy does not exceed $100,000.00, in which case a
single arbitrator (who shall have authority to render a maximum award of
$100,000.00, including all damages of any kind, costs and fees) may decide the
Dispute. The arbitrators may grant any remedy or relief that the arbitrators
deem just and equitable and within the scope of this Arbitration Program. The
arbitrators may also grant such ancillary relief as is necessary to make
effective the award. In all arbitration proceedings the arbitrators shall make
specific and written findings of fact and conclusions of law. In all
arbitration proceedings in which the amount in controversy exceeds $100,000.00,
in the aggregate, the Parties shall have in addition to the statutory right to
seek vacation or modification of any award pursuant to applicable law, the right
to seek vacation or modification of any award that is based in whole, or in
part, on an incorrect or erroneous ruling of law by appeal to an appropriate
court having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must be
filed in a court having jurisdiction over the Dispute within 15 days from the
date the award in rendered. The arbitrators' findings of fact shall be binding
on all Parties and shall not be subject to further review except as otherwise
allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in writing
by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the
headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this
Arbitration Program shall survive any termination, amendment, or expiration of
the Documents, unless the Parties otherwise expressly agree in writing making
specific reference to this Arbitration Program. To the extent permitted by
applicable law, the arbitrator shall have the power to award recovery of all
costs and fees (including attorney's fees, administrative fees, and arbitrators'
fees) to the prevailing Party. This Arbitration Program may be amended,
changed, or modified only by a writing which specifically refers to this
Arbitration Program and which is signed by all the Parties. If any term,
covenant, condition or provision of the Arbitration Program is found to be
unlawful or invalid or unenforceable, such illegality or invalidity or
unenforceable shall not affect the legality, validity or enforceability of the
remaining parts of this Arbitration Program, and all such remaining parts hereof
shall be valid and enforceable and have full force and effect as if the illegal,
invalid or unenforceable part had not been included. Each Party agrees to keep
all Disputes and arbitration proceedings strictly confidential, except for
disclosures of information required in the ordinary course of business of the
Parties or by applicable law or regulation.
<PAGE>
14.16 SEVERABILITY. If any provision of this Agreement shall be found
to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect. In lieu of such
provision, there shall be added automatically as part of this Agreement, a
provision as similar in its terms to such provision as may be possible and be
legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
VICTOR H. BURDICK, D.D.S., P.C.
By: /s/ Victor H. Burdick, D.D.S.
-------------------------------
Its: President
-------------------------------
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
-------------------------------
Its: Senior Vice President
-------------------------------
/s/ VICTOR H. BURDICK
------------------------------------
Victor H. Burdick, D.D.S.
<PAGE>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
Annex I Merger Consideration
A Target Companies
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment
Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
4.16 Excluded Assets and Excluded Liabilities
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
MARVIN V. CAVALLINO, D.D.S., A PROFESSIONAL CORPORATION
and
MARVIN CAVALLINO, D.D.S.
<PAGE>
TABLE OF CONTENTS
PAGE
----
Section 1. TERMS OF THE REORGANIZATION
1.2 MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.3 CERTIFICATE OF INCORPORATION; BYLAWS . . . . . . . . . . . . . . . .2
1.7 SUBSEQUENT ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . .2
Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING . . . . . . . . . . . . . . . . .2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS . . . . . . . . . . . . . . . .3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . .3
2.4 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . .3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . .4
2.8 LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . .4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . .4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . .4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . .4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . .7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . .7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . .7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . .8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . .8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . .8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . .8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . .9
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . .9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . .9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . .9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . 12
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . 13
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 13
Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . 13
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 14
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . 14
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . 14
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . 14
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . 14
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . 14
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . 14
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . 14
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . 14
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . 14
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . 15
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 15
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . 15
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . 15
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . 15
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . 16
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . 17
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . 17
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . 18
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . 19
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . 20
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . 20
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . 21
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . 22
14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . 22
14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . 22
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . 22
14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . 22
14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . 23
14.12 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . 23
14.13 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.14 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . 23
14.15 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.16 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and
executed effective August 20, 1997, is by and among PENTEGRA DENTAL GROUP,
INC., a Delaware corporation ("Pentegra"), MARVIN V. CAVALLINO, D.D.S., A
PROFESSIONAL CORPORATION, a Louisiana professional corporation ("Company")
and MARVIN CAVALLINO, D.D.S., shareholder of Company (referred to herein as
"Shareholder" or "Shareholders").
WITNESSETH:
WHEREAS, Company operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, the Boards of Directors of the Company and Pentegra have
determined that a reorganization between each of them is in the best
interests of their respective companies;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Company, the "Target Companies")
and simultaneously with the closing of the reorganization contemplated
herein, intends to consummate its initial public offering ("Initial Public
Offering") of shares of its common stock, par value $.01 per share ("Pentegra
Common Stock");
WHEREAS, it is intended for Federal income tax purposes that the
reorganization contemplated by this Agreement shall qualify as an
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE REORGANIZATION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.2 MERGER. Subject to and upon the terms and conditions contained
herein, on the Closing Date, the Company shall be merged with and into
Pentegra (or its designated affiliate, in which case, the references herein
to Pentegra shall be to such designated affiliate and its shares of common
stock) in accordance with this Agreement and the separate corporate existence
of the Company shall thereupon cease
<PAGE>
("Merger"). Pentegra shall be the surviving corporation in the Merger
("Surviving Corporation") and shall continue to be governed by the laws of
the State of Delaware and the separate corporate existence of Pentegra with
all rights, privileges, powers, immunities and purposes shall continue
unaffected by the Merger. The Merger shall have the effects specified in the
Delaware General Corporation Law and the Louisiana Business Corporation Law.
If all the conditions to the Merger set forth herein shall have been
fulfilled or waived in accordance herewith and this Agreement shall not have
been terminated in accordance herewith, the parties hereto shall cause to be
properly executed and filed on the Closing Date Certificates of Merger for
the Company meeting the applicable legal requirements. The Mergers shall
become effective on the Closing Date or the filing of such documents, in
accordance with applicable law, or at such later time as the parties hereto
have agreed upon and designated in such merger filings.
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of
Incorporation and Bylaws of Pentegra shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation until duly amended in
accordance with their terms.
1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra
immediately prior to the effective date of the Merger shall be the directors
of the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal
in accordance with the Surviving Corporation's Certificate of Incorporation
and Bylaws. The persons who are officers of Pentegra immediately prior to
the effective date of the Merger shall be the officers of the Surviving
Corporation and shall hold their respective offices until their successors
have been duly elected or appointed and qualified or until their earlier
death, resignation or removal.
1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and
without any action on the part of the holder thereof, all shares of the
Company's common stock issued and outstanding on the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired and
shall cease to exist, and each holder of a certificate of representing shares
of Company common stock shall thereafter cease to have any rights with
respect to such shares except the right to receive the consideration set
forth on ANNEX I attached hereto (the "Merger Consideration"). Each share
of common stock of the Company held in treasury at the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired
without payment of any consideration therefor. On the effective date of the
Merger, each share of Pentegra Common Stock issued and outstanding shall, by
virtue of he Mergers, and without any action on the part of the holder
thereof, continue unchanged and remain outstanding as a share of validly
issued, fully paid and nonassessable share of Surviving Corporation common
stock.
1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the
Merger, the Shareholders, as the holders of a certificate or certificates
representing shares of Company common stock shall, upon surrender of such
certificate or certificates, receive the Merger Consideration, and until the
certificate or certificates of Company common stock shall have been
surrendered by the Shareholder and replaced by a certificate or certificates
representing Pentegra Common Stock (as set forth on ANNEX I), the certificate
or certificates of Company common stock shall, for all purposes be deemed to
evidence ownership of the number of shares of Pentegra Common Stock
determined in accordance with the provisions of ANNEX I. All shares of
Pentegra Common Stock issuable to the Shareholders in the Merger shall be
deemed for all purposes to have been issued by Pentegra on the Closing Date.
The Shareholders shall deliver to Pentegra at Closing the certificate or
certificates representing the Company common stock owned by them, duly
endorsed in blank by the Shareholders, or accompanied by duly executed blank
stock powers, and with all necessary transfer tax and other revenue stamps,
acquired at the Shareholder's expense, affixed and cancelled.
1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under
<PAGE>
any of the Assets or otherwise to carry out this Agreement, in return for the
consideration set forth in this Agreement, the Company and Shareholders shall
excecute and deliver all such deeds, bills of sale, assignments and
assurances and take and do all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under the Assets in Pentegra or otherwise to carry
out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional
corporation or association, as applicable, duly organized, validly existing
and in good standing under the laws of the State of Louisiana. Company has
all necessary corporate powers to own all of its assets and to carry on its
business as such business is now being conducted. Company does not own stock
in or control, directly or indirectly, any other corporation, association or
business organization, nor is Company a party to any joint venture or
partnership. The Shareholders are the sole shareholders of Company and own
all outstanding shares of capital stock free of all security interests,
claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each
share of Company's common stock has been legally and validly issued and fully
paid and nonassessable. No shares of capital stock of Company are owned by
Company in treasury. There are no outstanding (a) bonds, debentures, notes or
other obligations the holders of which have the right to vote with the
stockholders of Company on any matter, (b) securities of Company convertible
into equity interests in Company, or (c) commitments, options, rights or
warrants to issue any such equity interests in Company, to issue securities
of Company convertible into such equity interests, or to redeem any
securities of Company. No shares of capital stock of Company have been
issued or disposed of in violation of the preemptive rights, rights of first
refusal or similar rights of any of Company's stockholders. Company is not
required to qualify to do business as a foreign corporation in any other
state or jurisdiction by reason of its business, properties or activities in
or relating to such other state or jurisdiction. Company does not have any
assets, employees or offices in any state other than the state set forth in
the first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate
power to execute, deliver and perform this Agreement and all agreements and
other documents executed and delivered by it pursuant to this Agreement or to
be executed and delivered on the Closing Date, and has taken all action
required by law, its Articles or Certificate of Incorporation, its Bylaws or
otherwise, to authorize the execution, delivery and performance of this
Agreement and such related documents. Each Shareholder has the legal
capacity to enter into and perform this Agreement and the other agreements to
be executed and delivered in connection herewith. Company has obtained the
approval of its stockholders necessary to the consummation of the
transactions contemplated herein. This Agreement and all agreements and
documents executed and delivered in connection herewith have been, or will be
as of the Closing Date, duly executed and delivered by Company and
Shareholders, as appropriate, and constitute or will constitute the legal,
valid and binding obligations of Company and Shareholders, enforceable
against Company and Shareholders in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of
consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, violate any provision of the Articles or
Certificate of Incorporation or Bylaws of Company or any provisions of, or
result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or
decree to which Company or any Shareholder is a party or by which Company or
any Shareholder is bound, or violate any material restrictions of any kind to
which Company is subject, or result in any lien or encumbrance on any of
Company's assets or the Assets.
<PAGE>
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to
the knowledge of Company and Shareholders, threatened, which may result in
the revocation, cancellation or suspension, or any adverse modification, of
any such licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Company or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been declared or paid by Company on any of its capital stock
since the Balance Sheet Date. No repurchase of any of Company's capital
stock has been approved, effected or is pending, or is contemplated by
Company.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Company and all
amendments thereto have been delivered to Pentegra. The minute books of
Company contain accurate minutes of all meetings of and consents to actions
taken without meetings of the Board of Directors and stockholders of Company
since its formation. The books of account of Company have been kept
accurately in the ordinary course of business and the revenues, expenses,
assets and liabilities of Company have been properly recorded in such books.
2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any
related unaudited statements of income, retained earnings, schedule of
accounts receivable, accounts payable and accrued liabilities, and cash flows
for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Company as of
the dates and for the periods indicated and reflect all fixed and contingent
liabilities of Company.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Company or any Shareholder leases, as lessor or lessee,
real or personal property used in operating the Business, related to the
Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and
enforceable in accordance with their respective terms, and there is not under
any such lease any existing default by Company, as lessor or lessee, or any
condition or event of which any Shareholder or Company has knowledge which
with notice or lapse of time, or both, would constitute a default, in respect
of which Company or Shareholders have not taken adequate steps to cure such
default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Company and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances
set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to
<PAGE>
the Closing Date and evidence of such releases of liens and claims shall be
provided to Pentegra on the Closing Date and the Assets shall not be used to
satisfy such liens, claims or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Company, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Company has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Company, including the names of any entities from whom Company previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Company in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Company has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the name of each director and officer of Company
and the offices held by each, (b) the most recent payroll report of Company,
showing all current employees of Company and their current levels of
compensation, (c) promised increases in compensation of employees of Company
that have not yet been effected, (d) oral or written employment agreements,
consulting agreements or independent contractor agreements (and all
amendments thereto) to which Company is a party, copies of which have been
delivered to Pentegra, and (e) all employee manuals, materials, policies,
procedures and work-related rules, copies of which have been delivered to
Pentegra. Company is in compliance with all applicable laws, rules,
regulations and ordinances respecting employment and employment practices.
Company has not engaged in any unfair labor practice. There are no unfair
labor practices charges or complaints pending or threatened against Company,
and Company has never been a party to any agreement with any union, labor
organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the
Business nor any of the Assets is subject to any pending, nor does Company or
any Shareholder have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Company, any Shareholder, the Business, the Assets or the
transactions contemplated by this Agreement, and, to the knowledge of Company
and Shareholders, no basis for any such action exists, nor is there any legal
impediment of which Company or any Shareholder has knowledge to the continued
operation of its business or the use of the Assets in the ordinary course,
subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Company has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Company ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted or may be made
by any party thereto. Except as indicated on such Exhibits, there is not
under any such Contract any existing default
<PAGE>
by Company or any Shareholder, or any condition or event of which Company or
any Shareholder has knowledge which with notice or lapse of time, or both,
would constitute a default. Company and Shareholders have no knowledge of
any default by any other party to such Contracts. Company and Shareholders
have not received notice of the intention of any party to any Contract to
cancel or terminate any Contract and have no reason to believe that any
amendment or change to any Contract is contemplated by any party thereto.
Other than those contracts, obligations and commitments listed on EXHIBIT
2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material
written or oral agreement contract, lease or arrangement, including without
limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
the Company or Shareholders, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Company on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
<PAGE>
(d) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Company since the Balance Sheet
Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(j) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties,
assets or business or the Business or the Assets, or experienced any other
material adverse change in its financial condition, assets, prospects,
liabilities or business;
(n) Declared or paid a distribution, payment or dividend of any
kind on the capital stock of Company;
(o) Repurchased, approved any repurchase or agreed to repurchase
any of Company's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Company has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Company has not received any notice that any tax deficiency or
delinquency has been or may be asserted against Company. There are no
audits relating to taxes of Company pending or in process or, to the
knowledge of Company, threatened. Company is not currently the beneficiary of
any waiver of any statute of limitations in respect of taxes nor of any
extension of time within which to file any tax return or to pay any tax
assessment or deficiency. There are no liens or encumbrances relating to
taxes on or threatened against any of the assets of Company. Company has
withheld
<PAGE>
and paid all taxes required by law to have been withheld and paid by it.
Neither Company nor any predecessor of Company is or has been a party to any
tax allocation or sharing agreement or a member of an affiliated group of
corporations filing a consolidated Federal income tax return. Company has
delivered to Pentegra correct and complete copies of Company's three most
recently filed annual state, local and Federal income tax returns, together
with all examination reports and statements of deficiencies assessed against
or agreed to by Company during the three calendar year period preceding the
date of this Agreement. Company has neither made any payments, is obligated
to make any payments, or is a party to any agreement that under any
circumstance could obligate it to make any payments that will not be
deductible under Code section 280G.
(b) No Shareholder presently intends to dispose of any of the shares of
Pentegra Common Stock to be received hereunder nor is a party to any plan,
arrangement or agreement for the disposition of such shares. Company and
Shareholders have no knowledge, after due inquiry, of any such intent, plan,
arrangement or agreement by any Shareholder. Nothing contained herein shall
prohibit Shareholders from selling such shares of Pentegra Common Stock after
the designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated
by this Agreement which may be now or hereafter asserted against Pentegra,
Company or Company's shareholders resulting from any action taken by Company
or any Shareholder or their respective agents or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Company did not have, as of the Balance Sheet
Date, and has not incurred since that date and will not have incurred as of
the Closing Date, any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
other than those incurred in the ordinary course of business or as set forth
on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable
grounds to know, of any basis for the assertion against Company or any
Shareholder as of the Balance Sheet Date, of any claim or liability of any
nature in any amount not fully reflected or reserved against on the Balance
Sheet, or of any claim or liability of any nature arising since that date
other than those incurred in the ordinary course of business or contemplated
by this Agreement. All indebtedness of Company (including without
limitation, indebtedness for borrowed money, guaranties and capital lease
obligations) is described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed
professional of Company carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the
industry. Valid and enforceable policies in such amounts are outstanding and
duly in force and will remain duly in force through the Closing Date. All
such policies are described in EXHIBIT 2.20 attached hereto and true and
correct copies have been delivered to Pentegra. Neither Shareholders nor
Company have not received notice or other communication from the issuer of
any such insurance policy cancelling or amending such policy or threatening
to do so. Neither Company, nor any Shareholder nor any licensed professional
employee of Company has any outstanding claims, settlements or premiums owed
against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Company has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company
<PAGE>
Plan," and collectively "Company Plans") have been operated and administered
in all material respects in accordance with all applicable laws, rules and
regulations, including without limitation, ERISA, the Internal Revenue Code
of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment
Act of 1967, as amended, and the related rules and regulations adopted by
those Federal agencies responsible for the administration of such laws. No
act or failure to act by Company has resulted in a "prohibited transaction"
(as defined in ERISA) with respect to the Company Plans. No "reportable
event" (as defined in ERISA) has occurred with respect to any of the Company
Plans. Company has not previously made, is not currently making, and is not
obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Company Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at least equal to the
value of plan liabilities or (ii) the value of plan liabilities in excess of
plan assets is disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Company, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and
Company's licensed professional employees, and the conduct of the Business
and use of the Assets, have complied with all applicable laws, rules,
regulations and licensing requirements, including, without limitation, the
Federal Environmental Protection Act, the Occupational Safety and Health Act,
the Americans with Disabilities Act and any environmental laws and medical
waste laws, and there exist no violations by Company, any Shareholder or any
licensed professional employee of Company of any Federal, state or local law
or regulation. Company and Shareholders have not received any notice of a
violation of any Federal, state and local laws, regulations and ordinances
relating to the operations of the Business and Assets and no notice of any
pending inspection or violation of any such law, regulation or ordinance has
been received by Company.
2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed
professional employee or independent contractor of Company has timely filed
all claims or other reports required to be filed with respect to the purchase
of services by third-party payors, and all such claims or reports are
complete and accurate, and has no liability to any payor with respect
thereto. There are no pending appeals, overpayment determinations,
adjustments, challenges, audit, litigation or notices of intent to open
Medicare or Medicaid claim determinations or other reports required to be
filed by Company, any Shareholder and each licensed professional employee of
Company. Neither Company, nor any Shareholder, nor any licensed professional
employee of Company has been convicted of, or pled guilty or nolo contendere
to, patient abuse or negligence, or any other Medicare or Medicaid program
related offense and none has committed any offense which may serve as the
basis for suspension or exclusion from the Medicare and Medicaid programs or
any other third party payor program. With respect to payors, Company,
Shareholders and Company's licensed professional employees has not (a)
knowingly and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company
or Shareholders in this Agreement, and no Exhibit or certificate issued or
executed by, or information furnished by, officers or directors of Company or
any Shareholder and furnished or to be furnished to Pentegra pursuant hereto,
or in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a
<PAGE>
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Company has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Company, or their respective spouses,
children or affiliates, owns directly or indirectly, on an individual or
joint basis, any interest in, has a compensation or other financial
arrangement with, or serves as an officer or director of, any customer or
supplier or competitor of Company or any organization that has a material
contract or arrangement with Company.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Company's services which
accounted for more than 10% of revenues of Company in the preceding fiscal
year. Company has good relations with all such payors and other material
payors of Company and none of such payors has notified Company that it
intends to discontinue its relationship with Company or to deny any claims
submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Company and Shareholders as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon
<PAGE>
Pentegra. Other than as would not have a material adverse effect, there are
no proceedings pending or, to the knowledge of Pentegra, threatened, which
may result in the revocation, cancellation or suspension, or any adverse
modification, of any such licenses or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has knowledge to the continued operation of its business or the use
of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the reorganization contemplated
hereby will be as of the Closing Date duly and validly authorized by all
necessary corporate action on the part of Pentegra. The Pentegra Common
Stock to be issued in connection with the reorganization contemplated hereby,
when issued in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Company or any
Shareholder pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, agree that between the
date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall
use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Company
and Shareholders agree to complete the Exhibits hereto to be provided by them
in form and substance satisfactory to Pentegra. Company and Shareholders
shall amend the Articles of Incorporation to provide that the Company shall
become a general business corporation.
4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the
Business and use the Assets in the ordinary course. Company and Shareholders
shall not enter into any lease, contract, indebtedness, commitment, purchase
or sale or acquire or dispose of any capital asset relating to the Business
or the Assets except in the ordinary course of business. Company and
Shareholders shall use their best efforts to preserve the Business and Assets
intact and shall not take any action that would have an adverse effect on
<PAGE>
the Business or Assets. Company and Shareholders shall use their best
efforts to preserve intact the relationships with payors, customers,
suppliers, patients and others having significant business relations with
Company. Company and Shareholders shall collect its receivables and pay its
trade payables in the ordinary course of business. Company and Shareholdes
shall not introduce any new method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra
and its authorized representatives access to, and make available for
inspection, all of the assets and business of Company, the Business and the
Assets, including employees, customers and suppliers and permit Pentegra and
its authorized representatives to inspect and make copies of all documents,
records and information with respect to the business or assets of Company,
the Business or the Assets as Pentegra or its representatives may request.
Company and Shareholders shall promptly notify Pentegra in writing of (a) any
notice or communication relating to a default or event that, with notice or
lapse of time or both, could become a default, under any contract, commitment
or obligation to which Company is a party or relating to the Business or the
Assets, and (b) any adverse change in Company's or the Business' financial
condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and
Shareholders shall use their best efforts to secure all necessary approvals
and consents of third parties to the consummation of the transactions
contemplated hereby, including consents described on EXHIBIT 2.4. Company
and Shareholders shall use their best efforts to obtain all licenses,
permits, approvals or other authorizations required under any law, rule,
regulation, or otherwise to provide the services of the Practice contemplated
by the Service Agreement and to conduct the intended business of the Practice
and operate the Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance
with the provisions hereof, Company and Shareholders shall not, and shall use
its best efforts to cause Company's employees, agents and representatives not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or
the making or implementation of any proposal or offer, including without
limitation, any proposal or offer to any Shareholder, with respect to a
merger, acquisition, consolidation or similar transaction involving, or the
purchase of all or any significant portion of the assets or any equity
securities of Company or engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person relating to such proposal or offer, and Company and Shareholders will
immediately cease any such activities, discussions or negotiations heretofore
conducted with respect to any of the foregoing. Company and Shareholders
shall immediately notify Pentegra if any such inquiries or proposals are
received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Company or any entity might have any liability whatsoever
arising from any insurance, pension plan, employment tax or similar
liability of Company to any employee or other person or entity (including,
without limitation, any Company Plan and any liability under employment
contracts with Company) allocable to services performed prior to the Closing
Date. Company and Shareholders acknowledge that the purpose and intent of
this covenant is to assure that Pentegra shall have no unfunded liability
whatsoever at any time after the Closing Date with respect to any of
Company's employees or similar persons or entities, including, without
limitation, any Company Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Company shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash
compensation of any Shareholder (other than in the ordinary course of
business) or other employee or an independent contractor of Company, adopt,
amend or terminate any compensation plan, employment agreement, independent
contractor agreement, employee policies and procedures or employee benefit
plan, take any action that could deplete the assets of any employee benefit,
or fail to pay any premium or contribution due or file any report with
respect to any employee benefit plan, or
<PAGE>
take any other actions with respect to its employees or employee matters
which might have an adverse effect upon Company, its business, assets or
prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Company, nor will any repurchase of
any of Company's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders
shall use their best efforts to take, or cause to be taken, all actions
necessary to effect the reorganization contemplated hereby under applicable
law.
4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not
change in any material respect the tax or financial accounting methods or
practices followed by Company (including any material change in any
assumption underlying, or any method of calculating, any bad debt,
contingency or other reserve), except as may be required by law or generally
accepted accounting principles. Company and Shareholders will duly,
accurately and timely (without regard to any extensions of time) file all
returns, information statements and other documents relating to taxes of
Company required to be filed by it, and pay all taxes required to be paid by
it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Company hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Company and Shareholders covenant and agree that all of the
creditors with respect to the Business and the Assets will be paid in full by
Company prior to the Closing Date, except to extent that any liability to
such creditors is assumed by Pentegra pursuant to this Agreement. If
required by Pentegra, Company and Shareholders shall furnish Pentegra with
proof of payment of all creditors with respect to the Business and the
Assets. Notwithstanding the foregoing, Company and Shareholders may dispute
the validity or amount of any such creditor's claim without being deemed to
be in violation of this SECTION 4.11, provided that such dispute is in good
faith and does not unreasonably delay the resolution of the claim and
provided, further that Company and Shareholders agree to indemnify and bond
Pentegra for such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Company leases any of its premises from any Shareholder
or other affiliate of Company or any shareholder of Company, Pentegra shall
have entered into a building lease (the "Building Lease") with the owner of
such premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, the terms set forth on
EXHIBIT 2.8 attached hereto and made a part hereof.
4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with
all requests made by Pentegra for the purpose of allowing Pentegra to hire
those non-dentist employees of Company designated by Pentegra, such
employment to be effective as of the Closing Date. Notwithstanding the
above, Company and Shareholders shall remain liable under any Company Plans
for any claims incurred by any employees or their spouses or dependents, and
for all compensation, bonuses, benefits and other such items and other
liabilities related to Company's employees incurred by Company prior to the
Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all
employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall
be treated as "leased employees" (as defined in Code Section 414(n)) of
Company and shall be treated as Clinic employees for purposes of eligibility
and participation in Company Plans.
4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective
as of the Closing Date.
<PAGE>
4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a
limited liability company, partnership or other legal entity (the "Practice")
approved by Pentegra for the purpose of practicing dentistry and entering
into the Service Agreement. The Practice shall be duly organized, in
existing and in good standing under the laws of the State in which the
practice of dentistry is conducted by the Shareholders and the Practice. The
Practice shall have all necessary power to own all of its assets and to carry
on its business as such business is now being conducted. The Shareholders
shall be the sole member/shareholder/partner of the Practice and own all such
interests free of all security interests, claims, encumbrances and liens.
Each interest in the Practice shall be legally and validly issued and fully
paid and nonassessable. There shall be no outstanding (a) bonds, debentures,
notes or other obligations the holders of which have the right to vote with
the members/partners/shareholders of the Practice on any matter, (b)
securities of the Practice convertible into equity interests in the Practice,
or (c) commitments, options, rights or warrants to issue any such equity
interests in the Practice, to issue securities of the Practice convertible
into such equity interests, or to redeem any securities of the Practice. No
interests of the Practice shall have been issued or disposed of in violation
of the preemptive rights, rights of first refusal or similar rights of any of
the Practice's members/partners/shareholders. The Practice shall quality to
do business as a foreign entity in any other state or jurisdiction by reason
of its business, properties or activities in or relating to such other state
or jurisdiction. The Company shall have transferred the Excluded Assets set
forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to
assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for
equity interest in the Practice, and the Company shall have distributed such
equity interests in the Practice to the Shareholders.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation,
Bylaws/Regulations and minutes of the Practice and all amendments thereto of
the Practice shall have been delivered to Pentegra and shall be in form and
substance satisfactory to Pentegra. The minute books of the Practice shall
contain all accurate minutes of the meetings of and consents to actions taken
without meetings of the members\managers/partners/board of directors of the
Practice since its formation. The books of account of the Practice shall
have been kept accurately in the ordinary course of business and the
revenues, expenses, assets and liabilities of the Practice shall have been
properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements
and other documents to be executed and delivered by it pursuant to this
Agreement, including without limitation, the Service Agreement and each
Employment Agreement or to be executed and delivered on the Closing Date, and
has taken all action required by law, its Organization/Partnership
Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to
authorize the execution, delivery and performance of such documents. The
Service Agreement, the Employment Agreement and the other agreements
contemplated hereby shall have been duly executed and delivered by the
Practice and constitute or will constitute the legal, valid and binding
obligations of the Practice enforceable against the Practice in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of the
Service Agreement, the Employment Agreements and the other agreements
contemplated hereby will not violate any provision of the organizational
documents of the Practice or any provisions of, or result in the acceleration
of, any obligation under any mortgage, lien, lease, agreement, rent,
instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any
material restrictions of any kind to which the Practice is subject, or result
in any lien or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
<PAGE>
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and have filed with
the proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS.
Pentegra, Shareholders and Company agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall
cooperate to promptly prepare and file with the Securities Exchange
Commission ("SEC") the Registration Statement on Form S-1 (or other
appropriate Form) to be filed by Pentegra in connection with its Initial
Public Offering (including the prospectus constituting a part thereof, the
"Registration Statement"). Pentegra shall obtain all necessary state
securities laws or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement and the Company and Shareholders
shall furnish all information concerning Company and Shareholders as may be
reasonable requested in connection with any such action.
Company and Shareholder represent and warrant that none of the
information or documents supplied or to be supplied by it specifically for
inclusion in the Registration Statement, by exhibit or otherwise, will, at
the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act of 1933, 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, in
light of the circumstances under which they were made, not misleading.
Company and Shareholders shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.
Company and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by
Pentegra in connection with the preparation of the Registration Statement and
each amendment or supplement thereto, or any other statement, filing, notice
or application made by or on behalf of each such party or any of its
subsidiaries to any governmental entity in connection with the transactions
contemplated by the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
<PAGE>
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Company and Shareholders contained herein shall have been true and correct
in all respects when initially made and shall be true and correct in all
respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Company and Shareholders prior
to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Company shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Company, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; DENTIST AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service
Agreement"), in substantially the form attached hereto as EXHIBIT 7.7,
pursuant to which Pentegra will provide management services to the Practice.
Each Shareholder shall have executed and delivered a Dentist Agreement in
substantially the form attached as EXHIBIT 4.10 of the Service Agreement
pursuant to which Shareholder shall, among other things, guaranty the
obligations of the Practice under the Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused
each shareholder of Company that has an existing employment agreement with
Company to have terminated his or her employment agreement with Company and
shall have executed an employment agreement ("Employment Agreement") with the
Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise
satisfactory to Company and Pentegra.
7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have
obtained all necessary government and other third-party approvals and
consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables
or payables between Company and its shareholders or affiliates and Company
shall not have any liabilities, including indebtedness, guaranties and
capital leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an
additional insured on their liability insurance program in accordance with
SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working
<PAGE>
capital of Company since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Company and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pentegra contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Company shall have received all documents, duly
executed in form satisfactory to Company and its counsel, referred to in
SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days
after requested by Pentegra, Company and Shareholders shall deliver to
Pentegra the following, all of which shall be in a form satisfactory to
counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel
for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or
letter agreement in form and substance mutually acceptable to the parties
hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
<PAGE>
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of Company
authorizing the execution, delivery and performance of this Agreement, the
Service Agreement, the Employment Agreements and all related documents and
agreements each certified by the Secretary as being true and correct copies
of the original thereof;
(d) executed merger certificate and/or plan as required by
applicable state law;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra and the original stock certificates
together with blank stock powers representing the outstanding shares of
Company common stock;
(f) certificates of the Shareholders and a duly authorized officer
of Company dated as of the Closing Date, (i) as to the truth and correctness
of the representations and warranties of Company and Shareholder contained
herein; (ii) as to the performance of and compliance by Company and
Shareholder with all covenants contained herein; and (iii) certifying that
all conditions precedent of Company and Shareholders to the Closing have been
satisfied;
(g) a certificate of the Secretary of Company certifying as to the
incumbency of the directors and officers of Company and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Company;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Company and any state of required
foreign qualification of Company establishing that Company is in existence
and is in good standing to transact business in its state of incorporation;
(i) an opinion of counsel to Company and Shareholder opining as to
the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Company and other matters reasonably requested by Pentegra;
(j) non-foreign affidavits executed by Company;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Company and Shareholders, the following, all of which shall
be in a form satisfactory to counsel to Company and Shareholders and shall be
held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending
Closing, pursuant to an escrow agreement or letter agreement in form and
substance mutually acceptable to the parties hereto:
(a) the Merger Consideration;
<PAGE>
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Company;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Company;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Company to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit attached hereto, any agreement executed pursuant hereto, and
any certificate executed and delivered by any party pursuant to the terms of
this Agreement, shall constitute representations and warranties of Company
and Shareholders, jointly and severally, or of Pentegra, as the case may be.
All such representations and warranties, and all representations and
warranties expressly labeled as such in this Agreement shall survive the date
of this Agreement and the Closing Date for a period of five (5) years
following the Closing Date, except that (i) the representations and
warranties with respect to environmental and medical waste laws and health
care laws and matters shall survive for a period of fifteen (15) years and
tax representations shall survive until one year after the expiration of the
applicable statute of limitations. Each party covenants with the other
parties not to make any claim with respect to such representations and
warranties, against any party after the date on which such survival period
shall terminate. No party shall be entitled to claim indemnity from any
other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has
timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the
case may be. Each party hereby releases, acquits and discharges the other
party from any and all claims and demands, actions and causes of action,
damages, costs, expenses and rights of setoff with respect to which the
notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely
provided.
<PAGE>
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH
OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS
SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED
PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES,
ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED
TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM
OR BY REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR
TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION
10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND
SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS,
DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING,
INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT
APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST
ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS,
DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER,
<PAGE>
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR
AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL
LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION
ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS
RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER
THE CLOSING DATE, PROVIDED, THAT THE FOREGOING SHALL NOT APPLY TO ACTIONS OR
OMISSIONS OF PENTEGRA OR ITS EMPLOYEES,
(E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY
RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A
RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH
THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS
SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS
SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE
REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO
MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or
<PAGE>
reimbursement may be sought hereunder, or within such lesser time as may be
provided by law for the defense of such action or proceeding, such
Indemnified Person shall notify Indemnitor thereof. If any such action or
other proceeding shall be brought against any Indemnified Person, Indemnitor
shall, upon written notice given within a reasonable time following receipt
by Indemnitor of such notice from Indemnified Person, be entitled to assume
the defense of such action or proceeding with counsel chosen by Indemnitor
and reasonably satisfactory to Indemnified Person; provided, however, that
any Indemnified Person may at its own expense retain separate counsel to
participate in such defense. Notwithstanding the foregoing, Indemnified
Person shall have the right to employ separate counsel at Indemnitor's
expense and to control its own defense of such action or proceeding if, in
the reasonable opinion of counsel to such Indemnified Person, (a) there are
or may be legal defenses available to such Indemnified Person or to other
Indemnified Persons that are different from or additional to those available
to Indemnitor and which could not be adequately advanced by counsel chosen by
Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor
and such Indemnified Person that would make such separate representation
advisable; provided, however, that in no event shall Indemnitor be required
to pay fees and expenses hereunder for more than one firm of attorneys of
Indemnified Person in any jurisdiction in any one action or proceeding or
group of related actions or proceedings. Indemnitor shall not, without the
prior written consent of any Indemnified Person, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim,
action or proceeding to which such Indemnified Person is a party unless such
settlement, compromise or consent includes an unconditional release of such
Indemnified Person from all liability arising or potentially arising from or
by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Company or any Shareholder giving
rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra
shall be entitled to offset the amount of damages incurred by it as a result
of such breach of warranty, representation, covenant or agreement against any
amounts payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Company
or any Shareholder contained in this Agreement or in any certificate or other
document executed and delivered by Company or any Shareholder pursuant to
this Agreement is or becomes untrue or breached in any material respect or if
Company or any Shareholder fails to comply in any material respect with any
covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
(c) at any time by Company or any Shareholder if any representation or
warranty of Pentegra contained in this Agreement or in any certificate or
other document executed and delivered by Pentegra pursuant to this Agreement
is or becomes untrue or breached in any material respect or if Pentegra fails
to comply in any material respect with any covenant or agreement contained
herein and such misrepresentation, noncompliance or breach is not cured,
waived or eliminated within twenty (20) days after receipt of written notice
thereof;
(d) by Pentegra, Shareholders or Company if the transaction contemplated
hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Company, that such termination is
desirable and in the best interests of Pentegra.
<PAGE>
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares
of Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer
shall be treated as effective for any purpose or (b) engage in any
transaction, whether or not with respect to any shares of Pentegra Common
Stock or any interest therein, the intent or effect of which is to reduce the
risk of owning shares of Pentegra Common Stock. The certificates evidencing
the Pentegra Common Stock delivered to Company pursuant to the terms hereof
will bear a legend substantially in the form set forth below and containing
such other information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be
voluntarily sold, assigned, exchanged, transferred,
encumbered, pledged, distributed, appointed or otherwise
disposed of, and the issuer shall not be required to give
effect to any attempted voluntary sale, assignment,
exchange, transfer, encumbrance, pledge, distribution,
appointment or other disposition prior to _________
[date that is one year from the Closing Date]. Upon the
written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any
stop order placed with the transfer agent) after the date
specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the
shares of Pentegra Common Stock to be delivered to Company pursuant to this
Agreement have not been and will not be registered under the Securities Act
of 1933 and may not be resold without compliance with the Securities Act of
1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to
this Agreement is being acquired solely for its own account, for investment
purposes only and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution. Each
Shareholder covenants, warrants and represents that none of the shares of
Pentegra Common Stock issued to it will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the Securities Act, as
amended, and the rules and regulations of the Securities Exchange Commission
and applicable state securities laws and regulations. All certificates
evidencing shares of Pentegra Common Stock shall bear the following legend in
addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under
the Securities Act of 1933 (the "Act") and may only be sold or
otherwise transferred if the holder hereof complies with the Act
and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock
shall bear any legend required by the securities or blue sky laws of any
state where Company resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the
economic risk of an investment in Pentegra Common Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and
have such knowledge and experience in financial and business matters that
they are capable of evaluating the merits and risks of the proposed
investment and therefore have the capacity to protect their own interests in
connection with the acquisition of the Pentegra Common Stock. Shareholders
and their representatives have had an adequate opportunity to ask questions
and receive answers from the officers of Pentegra concerning any and all
matters relating to the background and experience of the officers and
directors of Pentegra, the plans for the operations of the business of
Pentegra, and any plans for additional acquisitions and the like.
Shareholders and their representatives have asked any and all questions in
the nature
<PAGE>
described in the preceding sentence and all questions have been answered to
their satisfaction. Shareholders are "accredited investors" as defined in
Regulation D of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Company and Shareholders agree that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally
through no fault of Company or Shareholders, (ii) disclosure is required by
law or the order of any governmental authority under color of law, provided,
that prior to disclosing any information pursuant to this clause (ii),
Company and Shareholders shall, if possible, give prior written notice
thereof to the other parties hereto, and provide such other parties hereto
with the opportunity to contest such disclosure, (iii) Company and
Shareholders reasonably believe that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party, or
(iv) Company and Shareholders are the sole and exclusive owner of such
confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Company or Shareholders of the provisions of this SECTION 13, Pentegra shall
be entitled to an injunction restraining Company and Shareholders from
disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Pentegra from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. The obligations of the parties under this SECTION 13 shall
survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement will qualify as a reorganization within the meaning of
Section 368(a) of the Code. The tax returns (and schedules thereto) of
Shareholders, Company and Pentegra shall be filed in a manner consistent
with such intention and Shareholders and Pentegra shall each provide the
other with such tax information, reports, returns or schedules as may be
reasonably required to assist the other in so reporting the transactions
contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
<PAGE>
Facsimile: (214) 953-5822
If to Company and Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Company or any Shareholder for services
rendered in connection with negotiating and closing the transactions
contemplated by this Agreement or the documents to be executed in connection
herewith, whether or not such costs or expenses are incurred before or after
the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Company.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
<PAGE>
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one and the
same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Company, be relieved from its obligations
to Company under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Company, on the other hand, file suit in any court or institute
arbitration against any other party to enforce the terms of this Agreement
against the other party or to obtain performance by it hereunder, the
prevailing party will be entitled to recover all reasonable costs from the
other party as part of any judgment or award in such suit or arbitration. If
either party commences legal action or arbitration to enforce or defend its
rights under this Agreement, the prevailing party in such action shall be
entitled to recover its costs, including travel, lodging and meals for
itself, counsel and witnesses, actual witness fees paid and legal fees
actually paid, including costs of associating local counsel with regular
counsel, if actually paid. The term "prevailing party" shall mean the party
in whose favor final judgment after appeal (if any) is rendered with respect
to the claims asserted in the Complaint. "Reasonable attorneys' fees" are
those reasonable attorneys' fees actually incurred in obtaining a judgment in
favor of the prevailing party.
14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Company and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Company or may demand from Company, and Company agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Companys or Shareholders (hereinafter referred to as a "Party"), whether made
before or after the institution of any legal proceeding, any dispute among
the parties hereto in any way arising out of, related to, or in connection
with this Agreement (hereinafter a "Dispute"), shall be resolved by binding
arbitration in accordance with the terms of this Section (hereinafter the
"Arbitration Program").
<PAGE>
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or foreclosing upon any
personal property in which there has been granted a security interest or lien
by a Party in the Documents. In Disputes involving indebtedness or other
monetary obligations, each Party agrees that the other Party may proceed
against all liable persons, jointly and severally against one or more of
them, without impairing rights against other liable persons. Nor shall a
Party be required to join the principal obligor or any other liable persons
(e.g., sureties or guarantors) in any proceeding against a particular person.
A Party may release or settle with one or more liable persons as the Party
deems fit without releasing or impairing rights to proceed against any
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoeniz,
Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep
<PAGE>
all Disputes and arbitration proceedings strictly confidential, except for
disclosures of information required in the ordinary course of business of the
Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
MARVIN V. CAVALLINO, D.D.S., A
PROFESSIONAL CORPORATION
By: /s/ Marvin V. Cavallino, DDS
----------------------------------------
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
----------------------------------------
Its: Senior Vice President
----------------------------------------
/s/ Marvin Cavallino, DDS
----------------------------------------
Marvin Cavallino, D.D.S.
<PAGE>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
Annex I Merger Consideration
A Target Companies
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
4.16 Excluded Assets and Excluded Liabilities
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
JAMES H. CLARKE, JR., D.D.S., INC.
AND
JAMES H. CLARKE, JR., D.D.S.
<PAGE>
TABLE OF CONTENTS
PAGE
----
SECTION 1. TERMS OF THE REORGANIZATION
1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . 2
1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . 4
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . 5
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . 6
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . 9
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . 11
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . 12
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . 12
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . 13
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . 13
SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . 13
SECTION 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . 14
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . 14
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . 14
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . 14
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . 14
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . 14
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . 14
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . 14
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . 14
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . 14
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . 15
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . 15
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . 15
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . 15
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
SECTION 9. CLOSING DELIVERIES
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . 15
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . 16
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . 17
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . 17
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . 18
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . 19
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 11. TERMINATION
SECTION 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . 20
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . 20
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . 21
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
SECTION 14. MISCELLANEOUS
14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . 22
14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . 22
14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . 22
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . 22
14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . 22
14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . 23
14.12 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . 23
14.13 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.14 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . 23
14.15 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.16 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and
executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra"), James H. Clarke, Jr., D.D.S., Inc.("Company")
and James H. Clarke, Jr., D.D.S., shareholders of Company (referred to herein
as "Shareholder" or "Shareholders").
WITNESSETH:
WHEREAS, Company operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, the Boards of Directors of the Company and Pentegra have
determined that a reorganization between each of them is in the best interests
of their respective companies;
WHEREAS, Pentegra or its affiliated designee has entered into or intends to
enter into Agreements and Plans of Reorganization, Asset Contribution Agreements
and other acquisition agreements (collectively, the "Other Agreements") with
such persons or entities or the stockholders of such entities listed on EXHIBIT
A (together with Company, the "Target Companies") and simultaneously with the
closing of the reorganization contemplated herein, intends to consummate its
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock");
WHEREAS, it is intended for Federal income tax purposes that the
reorganization contemplated by this Agreement shall qualify as an reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE REORGANIZATION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock
is consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".
1.2 MERGER. Subject to and upon the terms and conditions contained
herein, on the Closing Date, the Company shall be merged with and into Pentegra
(or its designated affiliate, in which case, the references herein to Pentegra
shall be to such designated affiliate and its shares of common stock) in
accordance with this Agreement and the separate corporate existence of the
Company shall thereupon cease ("Merger"). Pentegra shall be the surviving
corporation in the Merger ("Surviving Corporation") and shall continue to be
governed by the laws of the State of Delaware and the separate corporate
existence of
<PAGE>
Pentegra with all rights, privileges, powers, immunities and purposes shall
continue unaffected by the Merger. The Merger shall have the effects
specified in the Delaware General Corporation Law and the Business
Corporation Law. If all the conditions to the Merger set forth herein shall
have been fulfilled or waived in accordance herewith and this Agreement shall
not have been terminated in accordance herewith, the parties hereto shall
cause to be properly executed and filed on the Closing Date Certificates of
Merger for the Company meeting the applicable legal requirements. The
Mergers shall become effective on the Closing Date or the filing of such
documents, in accordance with applicable law, or at such later time as the
parties hereto have agreed upon and designated in such merger filings.
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of
Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation
and Bylaws of the Surviving Corporation until duly amended in accordance with
their terms.
1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra
immediately prior to the effective date of the Merger shall be the directors of
the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
Bylaws. The persons who are officers of Pentegra immediately prior to the
effective date of the Merger shall be the officers of the Surviving Corporation
and shall hold their respective offices until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal.
1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and
without any action on the part of the holder thereof, all shares of the
Company's common stock issued and outstanding on the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired and
shall cease to exist, and each holder of a certificate of representing shares of
Company common stock shall thereafter cease to have any rights with respect to
such shares except the right to receive the consideration set forth on ANNEX I
attached hereto (the "Merger Consideration"). Each share of common stock of
the Company held in treasury at the effective date of the Merger shall cease to
be outstanding and shall be cancelled and retired without payment of any
consideration therefor. On the effective date of the Merger, each share of
Pentegra Common Stock issued and outstanding shall, by virtue of he Mergers, and
without any action on the part of the holder thereof, continue unchanged and
remain outstanding as a share of validly issued, fully paid and nonassessable
share of Surviving Corporation common stock.
1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger,
the Shareholders, as the holders of a certificate or certificates representing
shares of Company common stock shall, upon surrender of such certificate or
certificates, receive the Merger Consideration, and until the certificate or
certificates of Company common stock shall have been surrendered by the
Shareholder and replaced by a certificate or certificates representing Pentegra
Common Stock (as set forth on ANNEX I), the certificate or certificates of
Company common stock shall, for all purposes be deemed to evidence ownership of
the number of shares of Pentegra Common Stock determined in accordance with the
provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the
Shareholders in the Merger shall be deemed for all purposes to have been issued
by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at
Closing the certificate or certificates representing the Company common stock
owned by them, duly endorsed in blank by the Shareholders, or accompanied by
duly executed blank stock powers, and with all necessary transfer tax and other
revenue stamps, acquired at the Shareholder's expense, affixed and cancelled.
1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in
<PAGE>
this Agreement, the Company and Shareholders shall execute and deliver all
such deeds, bills of sale, assignments and assurances and take and do all
such other actions and things as may be necessary or desirable to vest,
perfect or confirm any and all right, title and interest in, to and under the
Assets in Pentegra or otherwise to carry out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional
corporation or association, as applicable, duly organized, validly existing and
in good standing under the laws of the State of Texas. Company has all
necessary corporate powers to own all of its assets and to carry on its business
as such business is now being conducted. Company does not own stock in or
control, directly or indirectly, any other corporation, association or business
organization, nor is Company a party to any joint venture or partnership. The
Shareholders are the sole shareholders of Company and own all outstanding shares
of capital stock free of all security interests, claims, encumbrances and liens
in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock
has been legally and validly issued and fully paid and nonassessable. No shares
of capital stock of Company are owned by Company in treasury. There are no
outstanding (a) bonds, debentures, notes or other obligations the holders of
which have the right to vote with the stockholders of Company on any matter, (b)
securities of Company convertible into equity interests in Company, or (c)
commitments, options, rights or warrants to issue any such equity interests in
Company, to issue securities of Company convertible into such equity interests,
or to redeem any securities of Company. No shares of capital stock of Company
have been issued or disposed of in violation of the preemptive rights, rights of
first refusal or similar rights of any of Company's stockholders. Company is
not required to qualify to do business as a foreign corporation in any other
state or jurisdiction by reason of its business, properties or activities in or
relating to such other state or jurisdiction. Company does not have any assets,
employees or offices in any state other than the state set forth in the first
sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power
to execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all action required by
law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to
authorize the execution, delivery and performance of this Agreement and such
related documents. Each Shareholder has the legal capacity to enter into and
perform this Agreement and the other agreements to be executed and delivered in
connection herewith. Company has obtained the approval of its stockholders
necessary to the consummation of the transactions contemplated herein. This
Agreement and all agreements and documents executed and delivered in connection
herewith have been, or will be as of the Closing Date, duly executed and
delivered by Company and Shareholders, as appropriate, and constitute or will
constitute the legal, valid and binding obligations of Company and Shareholders,
enforceable against Company and Shareholders in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of consents
described on EXHIBIT 2.4, the consummation of the actions contemplated hereby
will not, violate any provision of the Articles or Certificate of Incorporation
or Bylaws of Company or any provisions of, or result in the acceleration of, any
obligation under any mortgage, lien, lease, agreement, rent, instrument, order,
arbitration award, judgment or decree to which Company or any Shareholder is a
party or by which Company or any Shareholder is bound, or violate any material
restrictions of any kind to which Company is subject, or result in any lien or
encumbrance on any of Company's assets or the Assets.
<PAGE>
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets, or
waivers thereof, have been duly obtained and are in full force and effect and
are described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Company and Shareholders, threatened, which may result in the
revocation, cancellation or suspension, or any adverse modification, of any such
licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Company or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been declared or paid by Company on any of its capital stock
since the Balance Sheet Date. No repurchase of any of Company's capital stock
has been approved, effected or is pending, or is contemplated by Company.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Company and all amendments
thereto have been delivered to Pentegra. The minute books of Company contain
accurate minutes of all meetings of and consents to actions taken without
meetings of the Board of Directors and stockholders of Company since its
formation. The books of account of Company have been kept accurately in the
ordinary course of business and the revenues, expenses, assets and liabilities
of Company have been properly recorded in such books.
2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any related
unaudited statements of income, retained earnings, schedule of accounts
receivable, accounts payable and accrued liabilities, and cash flows for the
twelve months then ended (collectively, with the related notes thereto, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and results of operations of Company as of the dates and for the
periods indicated and reflect all fixed and contingent liabilities of Company.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Company or any Shareholder leases, as lessor or lessee, real
or personal property used in operating the Business, related to the Assets or
otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in
accordance with their respective terms, and there is not under any such lease
any existing default by Company, as lessor or lessee, or any condition or event
of which any Shareholder or Company has knowledge which with notice or lapse of
time, or both, would constitute a default, in respect of which Company or
Shareholders have not taken adequate steps to cure such default or to prevent a
default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Company and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for
<PAGE>
those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Company
shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those
encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior
to the Closing Date and evidence of such releases of liens and claims shall
be provided to Pentegra on the Closing Date and the Assets shall not be used
to satisfy such liens, claims or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned or
used by Company, are in good, current, standard and merchantable condition and
are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Company has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Company, including the names of any entities from whom Company previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Company in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Company has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on
EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this
Agreement of: (a) the name of each director and officer of Company and the
offices held by each, (b) the most recent payroll report of Company, showing all
current employees of Company and their current levels of compensation, (c)
promised increases in compensation of employees of Company that have not yet
been effected, (d) oral or written employment agreements, consulting agreements
or independent contractor agreements (and all amendments thereto) to which
Company is a party, copies of which have been delivered to Pentegra, and (e) all
employee manuals, materials, policies, procedures and work-related rules, copies
of which have been delivered to Pentegra. Company is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Company has not engaged in any unfair labor practice.
There are no unfair labor practices charges or complaints pending or threatened
against Company, and Company has never been a party to any agreement with any
union, labor organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the Business
nor any of the Assets is subject to any pending, nor does Company or any
Shareholder have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Company, any Shareholder, the Business, the Assets or the transactions
contemplated by this Agreement, and, to the knowledge of Company and
Shareholders, no basis for any such action exists, nor is there any legal
impediment of which Company or any Shareholder has knowledge to the continued
operation of its business or the use of the Assets in the ordinary course,
subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Company has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts, obligations
and commitments of Company ("Contracts"), entered into in connection with and
related to the Assets or the Business, all of which are listed or incorporated
by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case
of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than
leases) attached hereto. Except as otherwise indicated on
<PAGE>
such Exhibits, all of such Contracts are valid, binding and enforceable in
accordance with their terms and are in full force and effect, and no
defenses, offsets or counterclaims have been asserted or may be made by any
party thereto. Except as indicated on such Exhibits, there is not under any
such Contract any existing default by Company or any Shareholder, or any
condition or event of which Company or any Shareholder has knowledge which
with notice or lapse of time, or both, would constitute a default. Company
and Shareholders have no knowledge of any default by any other party to such
Contracts. Company and Shareholders have not received notice of the
intention of any party to any Contract to cancel or terminate any Contract
and have no reason to believe that any amendment or change to any Contract is
contemplated by any party thereto. Other than those contracts, obligations
and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company
are not a party to any material written or oral agreement contract, lease or
arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product or
service;
(h) Loan agreement or other contract for money borrowed or lent or to
be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of the
Company or Shareholders, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Company on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) or entered into any contract, lease, license or
commitment, except in connection with the performance of this Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued, contingent
or otherwise) other than (i) liabilities shown or reflected on the Balance
Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary
course of business;
<PAGE>
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(d) Made any payments to or loaned any money to any person or entity
other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have been
required due to income or operations of Company since the Balance Sheet Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants or
agents, or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of any officer, employee, consultant or agent;
(j) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties, assets
or business or the Business or the Assets, or experienced any other material
adverse change in its financial condition, assets, prospects, liabilities or
business;
(n) Declared or paid a distribution, payment or dividend of any kind
on the capital stock of Company;
(o) Repurchased, approved any repurchase or agreed to repurchase any
of Company's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Company has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it. All such tax returns are complete and accurate in all respects and
properly reflect the relevant taxes for the periods covered thereby. Company
has not received any notice that any
<PAGE>
tax deficiency or delinquency has been or may be asserted against Company.
There are no audits relating to taxes of Company pending or in process or, to
the knowledge of Company, threatened. Company is not currently the
beneficiary of any waiver of any statute of limitations in respect of taxes
nor of any extension of time within which to file any tax return or to pay
any tax assessment or deficiency. There are no liens or encumbrances
relating to taxes on or threatened against any of the assets of Company.
Company has withheld and paid all taxes required by law to have been withheld
and paid by it. Neither Company nor any predecessor of Company is or has
been a party to any tax allocation or sharing agreement or a member of an
affiliated group of corporations filing a consolidated Federal income tax
return. Company has delivered to Pentegra correct and complete copies of
Company's three most recently filed annual state, local and Federal income
tax returns, together with all examination reports and statements of
deficiencies assessed against or agreed to by Company during the three
calendar year period preceding the date of this Agreement. Company has
neither made any payments, is obligated to make any payments, or is a party
to any agreement that under any circumstance could obligate it to make any
payments that will not be deductible under Code section 280G.
(b) No Shareholder presently intends to dispose of any of the shares of
Pentegra Common Stock to be received hereunder nor is a party to any plan,
arrangement or agreement for the disposition of such shares. Company and
Shareholders have no knowledge, after due inquiry, of any such intent, plan,
arrangement or agreement by any Shareholder. Nothing contained herein shall
prohibit Shareholders from selling such shares of Pentegra Common Stock after
the designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated by
this Agreement which may be now or hereafter asserted against Pentegra, Company
or Company's shareholders resulting from any action taken by Company or any
Shareholder or their respective agents or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against
on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and
has not incurred since that date and will not have incurred as of the Closing
Date, any liabilities or obligations of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, other than those
incurred in the ordinary course of business or as set forth on EXHIBIT 2.16.
Company and Shareholders do not know, or have reasonable grounds to know, of any
basis for the assertion against Company or any Shareholder as of the Balance
Sheet Date, of any claim or liability of any nature in any amount not fully
reflected or reserved against on the Balance Sheet, or of any claim or liability
of any nature arising since that date other than those incurred in the ordinary
course of business or contemplated by this Agreement. All indebtedness of
Company (including without limitation, indebtedness for borrowed money,
guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached
hereto.
2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed
professional of Company carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the industry.
Valid and enforceable policies in such amounts are outstanding and duly in force
and will remain duly in force through the Closing Date. All such policies are
described in EXHIBIT 2.20 attached hereto and true and correct copies have been
delivered to Pentegra. Neither Shareholders nor Company have not received
notice or other communication from the issuer of any such insurance policy
cancelling or amending such policy or threatening to do so. Neither Company,
nor any Shareholder nor any licensed professional employee of Company has any
outstanding claims, settlements or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached
hereto, Company has neither established, nor maintains, nor is obligated to make
contributions to or under or otherwise
<PAGE>
participate in, (a) any bonus or other type of compensation or employment
plan, program, agreement, policy, commitment, contract or arrangement
(whether or not set forth in a written document); (b) any pension,
profit-sharing, retirement or other plan, program or arrangement; or (c) any
other employee benefit plan, fund or program, including, but not limited to,
those described in SECTION 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20
(individually "Company Plan," and collectively "Company Plans") have been
operated and administered in all material respects in accordance with all
applicable laws, rules and regulations, including without limitation, ERISA,
the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights
Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age
Discrimination in Employment Act of 1967, as amended, and the related rules
and regulations adopted by those Federal agencies responsible for the
administration of such laws. No act or failure to act by Company has
resulted in a "prohibited transaction" (as defined in ERISA) with respect to
the Company Plans. No "reportable event" (as defined in ERISA) has occurred
with respect to any of the Company Plans. Company has not previously made,
is not currently making, and is not obligated in any way to make, any
contributions to any multiemployer plan within the meaning of the
Multi-Employer Pension Plan Amendments Act of 1980. With respect to each
Company Plan, either (i) the value of plan assets (including commitments
under insurance contracts) is at least equal to the value of plan liabilities
or (ii) the value of plan liabilities in excess of plan assets is disclosed
on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing
Date, a party to any agreement or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree, rule or
regulation that materially and adversely affects the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Company,
the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's
licensed professional employees, and the conduct of the Business and use of the
Assets, have complied with all applicable laws, rules, regulations and licensing
requirements, including, without limitation, the Federal Environmental
Protection Act, the Occupational Safety and Health Act, the Americans with
Disabilities Act and any environmental laws and medical waste laws, and there
exist no violations by Company, any Shareholder or any licensed professional
employee of Company of any Federal, state or local law or regulation. Company
and Shareholders have not received any notice of a violation of any Federal,
state and local laws, regulations and ordinances relating to the operations of
the Business and Assets and no notice of any pending inspection or violation of
any such law, regulation or ordinance has been received by Company.
2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed
professional employee or independent contractor of Company has timely filed all
claims or other reports required to be filed with respect to the purchase of
services by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are no
pending appeals, overpayment determinations, adjustments, challenges, audit,
litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Company, any Shareholder
and each licensed professional employee of Company. Neither Company, nor any
Shareholder, nor any licensed professional employee of Company has been
convicted of, or pled guilty or nolo contendere to, patient abuse or negligence,
or any other Medicare or Medicaid program related offense and none has committed
any offense which may serve as the basis for suspension or exclusion from the
Medicare and Medicaid programs or any other third party payor program. With
respect to payors, Company, Shareholders and Company's licensed professional
employees has not (a) knowingly and willfully making or causing to be made a
false statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in determining
rights to any benefit or payment; (c) failed to disclose knowledge of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own
<PAGE>
behalf or on behalf of another, with the intent to fraudulently secure such
benefit or payment; and (d) violated any applicable state anti-remuneration
or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company
or Shareholders in this Agreement, and no Exhibit or certificate issued or
executed by, or information furnished by, officers or directors of Company or
any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or
in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements or facts contained therein not
misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Company has with any bank or other
financial institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Company, or their respective spouses,
children or affiliates, owns directly or indirectly, on an individual or joint
basis, any interest in, has a compensation or other financial arrangement with,
or serves as an officer or director of, any customer or supplier or competitor
of Company or any organization that has a material contract or arrangement with
Company.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of
the names and addresses of each payor of Company's services which accounted for
more than 10% of revenues of Company in the preceding fiscal year. Company has
good relations with all such payors and other material payors of Company and
none of such payors has notified Company that it intends to discontinue its
relationship with Company or to deny any claims submitted to such payor for
payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Company and Shareholders as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions required
by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize
the execution, delivery and performance of this Agreement and such related
documents. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing Date,
duly executed and delivered by Pentegra and constitute or will constitute the
legal, valid and binding obligations of Pentegra, enforceable against Pentegra
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and delivery
of this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and, the
consummation of the actions contemplated hereby will not, violate any provision
of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or decree
to which Pentegra is a party or by which Pentegra is bound, or violate any
material restrictions of any kind to which Pentegra is subject, or result in any
lien or encumbrance on any of Pentegra's assets. Other than as have been
obtained or as would not have a material adverse effect, there are no consents
of any person or entity required
<PAGE>
for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Pentegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would not
have a material adverse effect, there are no proceedings pending or, to the
knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses or
permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any pending,
nor does Pentegra have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Pentegra, its business, assets or the transactions contemplated by
this Agreement, and, to the knowledge of Pentegra, no basis for any such action
exists, nor is there any legal impediment of which Pentegra has knowledge to the
continued operation of its business or the use of its Assets in the ordinary
course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports and
other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it, other than as would not have a material adverse effect. Pentegra
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Pentegra. There are no audits relating to taxes of
Pentegra pending or in process or, to the knowledge of Pentegra, threatened.
Pentegra is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the reorganization contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the reorganization contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra
in this Agreement, and no Exhibit or certificate issued by officers or directors
of Pentegra and furnished or to be furnished to Company or any Shareholder
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, agree that between the
date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall
use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Company and
Shareholders agree to complete the Exhibits hereto to be provided by them in
form and substance satisfactory to Pentegra.
<PAGE>
4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the
Business and use the Assets in the ordinary course. Company and Shareholders
shall not enter into any lease, contract, indebtedness, commitment, purchase or
sale or acquire or dispose of any capital asset relating to the Business or the
Assets except in the ordinary course of business. Company and Shareholders
shall use their best efforts to preserve the Business and Assets intact and
shall not take any action that would have an adverse effect on the Business or
Assets. Company and Shareholders shall use their best efforts to preserve
intact the relationships with payors, customers, suppliers, patients and others
having significant business relations with Company. Company and Shareholders
shall collect its receivables and pay its trade payables in the ordinary course
of business. Company and Shareholder shall not introduce any new method of
management, operations or accounting.
4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and
its authorized representatives access to, and make available for inspection, all
of the assets and business of Company, the Business and the Assets, including
employees, customers and suppliers and permit Pentegra and its authorized
representatives to inspect and make copies of all documents, records and
information with respect to the business or assets of Company, the Business or
the Assets as Pentegra or its representatives may request. Company and
Shareholders shall promptly notify Pentegra in writing of (a) any notice or
communication relating to a default or event that, with notice or lapse of time
or both, could become a default, under any contract, commitment or obligation to
which Company is a party or relating to the Business or the Assets, and (b) any
adverse change in Company's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and
Shareholders shall use their best efforts to secure all necessary approvals and
consents of third parties to the consummation of the transactions contemplated
hereby, including consents described on EXHIBIT 2.4. Company and Shareholders
shall use their best efforts to obtain all licenses, permits, approvals or other
authorizations required under any law, rule, regulation, or otherwise to provide
the services of the Practice contemplated by the Service Agreement and to
conduct the intended business of the Practice and operate the Business and use
the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of Closing or the termination of this Agreement in accordance with the
provisions hereof, Company and Shareholders shall not, and shall use its best
efforts to cause Company's employees, agents and representatives not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer, including without limitation,
any proposal or offer to any Shareholder, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of Company or engage
in any negotiations concerning, or provide any confidential information or data
to, or have any discussions with, any person relating to such proposal or offer,
and Company and Shareholders will immediately cease any such activities,
discussions or negotiations heretofore conducted with respect to any of the
foregoing. Company and Shareholders shall immediately notify Pentegra if any
such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund completely
for any accrued benefits, where applicable, or vested accrued benefits for which
Company or any entity might have any liability whatsoever arising from any
insurance, pension plan, employment tax or similar liability of Company to any
employee or other person or entity (including, without limitation, any Company
Plan and any liability under employment contracts with Company) allocable to
services performed prior to the Closing Date. Company and Shareholders
acknowledge that the purpose and intent of this covenant is to assure that
Pentegra shall have no unfunded liability whatsoever at any time after the
Closing Date with respect to any of Company's employees or similar persons or
entities, including, without limitation, any Company Plan for the period
<PAGE>
prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Company shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of any Shareholder (other than in the ordinary course of business) or other
employee or an independent contractor of Company, adopt, amend or terminate any
compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect upon Company, its business, assets or
prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Company, nor will any repurchase of any
of Company's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall
use their best efforts to take, or cause to be taken, all actions necessary to
effect the reorganization contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change
in any material respect the tax or financial accounting methods or practices
followed by Company (including any material change in any assumption underlying,
or any method of calculating, any bad debt, contingency or other reserve),
except as may be required by law or generally accepted accounting principles.
Company and Shareholders will duly, accurately and timely (without regard to any
extensions of time) file all returns, information statements and other documents
relating to taxes of Company required to be filed by it, and pay all taxes
required to be paid by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Company hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Company and Shareholders covenant and agree that all of the
creditors with respect to the Business and the Assets will be paid in full by
Company prior to the Closing Date, except to extent that any liability to such
creditors is assumed by Pentegra pursuant to this Agreement. If required by
Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment
of all creditors with respect to the Business and the Assets. Notwithstanding
the foregoing, Company and Shareholders may dispute the validity or amount of
any such creditor's claim without being deemed to be in violation of this
SECTION 4.11, provided that such dispute is in good faith and does not
unreasonably delay the resolution of the claim and provided, further that
Company and Shareholders agree to indemnify and bond Pentegra for such amounts
as is satisfactory to Pentegra.
4.12 LEASE. If Company leases any of its premises from any Shareholder or
other affiliate of Company or any shareholder of Company, Pentegra shall have
entered into a building lease (the "Building Lease") with the owner of such
premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, (i) a five year initial
term plus three five-year renewal options, (ii) a lease rate equal to the fair
market value lease rate, as agreed to by Pentegra, and (iii) such other
provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with
all requests made by Pentegra for the purpose of allowing Pentegra to hire those
non-dentist employees of Company designated by Pentegra, such employment to be
effective as of the Closing Date. Notwithstanding the above, Company and
Shareholders shall remain liable under any Company Plans for any claims incurred
by any employees or their spouses or dependents, and for all compensation,
bonuses, benefits and other such
<PAGE>
items and other liabilities related to Company's employees incurred by
Company prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all
employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be
treated as "leased employees" (as defined in Code Section 414(n)) of Company and
shall be treated as Clinic employees for purposes of eligibility and
participation in Company Plans.
4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective as
of the Closing Date.
4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a
limited liability company, partnership or other legal entity (the "Practice")
approved by Pentegra for the purpose of practicing dentistry and entering
into the Service Agreement. The Practice shall be duly organized, in
existing and in good standing under the laws of the State in which the
practice of dentistry is conducted by the Shareholders and the Practice. The
Practice shall have all necessary power to own all of its assets and to carry
on its business as such business is now being conducted. The Shareholders
shall be the sole member/shareholder/partner of the Practice and own all such
interests free of all security interests, claims, encumbrances and liens.
Each interest in the Practice shall be legally and validly issued and fully
paid and nonassessable. There shall be no outstanding (a) bonds, debentures,
notes or other obligations the holders of which have the right to vote with
the members/partners/shareholders of the Practice on any matter, (b)
securities of the Practice convertible into equity interests in the Practice,
or (c) commitments, options, rights or warrants to issue any such equity
interests in the Practice, to issue securities of the Practice convertible
into such equity interests, or to redeem any securities of the Practice. No
interests of the Practice shall have been issued or disposed of in violation
of the preemptive rights, rights of first refusal or similar rights of any of
the Practice's members/partners/shareholders. The Practice shall quality to
do business as a foreign entity in any other state or jurisdiction by reason
of its business, properties or activities in or relating to such other state
or jurisdiction. The Company shall have transferred the Excluded Assets set
forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to
assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for
equity interest in the Practice, and the Company shall have distributed such
equity interests in the Practice to the Shareholders.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations
and minutes of the Practice and all amendments thereto of the Practice shall
have been delivered to Pentegra and shall be in form and substance satisfactory
to Pentegra. The minute books of the Practice shall contain all accurate
minutes of the meetings of and consents to actions taken without meetings of the
members\managers/partners/board of directors of the Practice since its
formation. The books of account of the Practice shall have been kept accurately
in the ordinary course of business and the revenues, expenses, assets and
liabilities of the Practice shall have been properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements and
other documents to be executed and delivered by it pursuant to this Agreement,
including without limitation, the Service Agreement and each Employment
Agreement or to be executed and delivered on the Closing Date, and has taken all
action required by law, its Organization/Partnership Agreement/Articles of
Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution,
delivery and performance of such documents. The Service Agreement, the
Employment Agreement and the other agreements contemplated hereby shall have
been duly executed and delivered by the Practice and constitute or will
constitute the legal, valid and binding obligations of the Practice enforceable
against the Practice in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of the Service Agreement, the Employment Agreements and
<PAGE>
the other agreements contemplated hereby will not violate any provision of the
organizational documents of the Practice or any provisions of, or result in the
acceleration of, any obligation under any mortgage, lien, lease, agreement,
rent, instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any material
restrictions of any kind to which the Practice is subject, or result in any lien
or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and have filed with the
proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS.
Pentegra, Shareholders and Company agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall
cooperate to promptly prepare and file with the Securities Exchange Commission
("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to
be filed by Pentegra in connection with its Initial Public Offering (including
the prospectus constituting a part thereof, the "Registration Statement").
Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits
and approvals required to carry out the transactions contemplated by this
Agreement and the Company and Shareholders shall furnish all information
concerning Company and Shareholders as may be reasonable requested in connection
with any such action.
Company and Shareholder represent and warrant that none of the information
or documents supplied or to be supplied by it specifically for inclusion in the
Registration Statement, by exhibit or otherwise, will, at the time the
Registration Statement and each amendment or supplement thereto, if any, becomes
effective under the Securities Act of 1933, 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, in light of the circumstances under
which they were made, not misleading. Company and Shareholders shall be
entitled to review the Registration Statement and each amendment thereto, if
any, prior to the time each becomes effective under the Securities Act of 1933.
Company and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable
<PAGE>
requested by Pentegra in connection with the preparation of the Registration
Statement and each amendment or supplement thereto, or any other statement,
filing, notice or application made by or on behalf of each such party or any
of its subsidiaries to any governmental entity in connection with the
transactions contemplated by the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at or
prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Company and Shareholders contained herein shall have been true and correct in
all respects when initially made and shall be true and correct in all respects
as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Company and Shareholders prior to
the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Company shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Company, the Business and the Assets, the results of which shall
be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service Agreement"),
in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which
Pentegra will provide management services to the Practice. Each Shareholder
shall have executed and delivered a Guaranty Agreement in substantially the form
attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder
shall, among other things, guaranty the obligations of the Practice under the
Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused
each shareholder of Company that has an existing employment agreement with
Company to have terminated his or her employment agreement with Company and
shall have executed an employment agreement ("Employment Agreement") with the
Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise
satisfactory to Company and Pentegra.
7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained
all necessary government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly
executed in form satisfactory to Pentegra and its counsel, referred to in
SECTION 9.1.
<PAGE>
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or
payables between Company and its shareholders or affiliates and Company shall
not have any liabilities, including indebtedness, guaranties and capital leases,
that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an
additional insured on their liability insurance program in accordance with
SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Company since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Company and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Pentegra contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Company shall have received all documents, duly
executed in form satisfactory to Company and its counsel, referred to in SECTION
9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days
after requested by
<PAGE>
Pentegra, Company and Shareholders shall deliver to Pentegra the following,
all of which shall be in a form satisfactory to counsel to Pentegra and shall
be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending
Closing, pursuant to an escrow agreement or letter agreement in form and
substance mutually acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals of
all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of Company
authorizing the execution, delivery and performance of this Agreement, the
Service Agreement, the Employment Agreements and all related documents and
agreements each certified by the Secretary as being true and correct copies of
the original thereof;
(d) executed merger certificate and/or plan as required by applicable
state law;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra and the original stock certificates together
with blank stock powers representing the outstanding shares of Company common
stock;
(f) certificates of the Shareholders and a duly authorized officer of
Company dated as of the Closing Date, (i) as to the truth and correctness of the
representations and warranties of Company and Shareholder contained herein; (ii)
as to the performance of and compliance by Company and Shareholder with all
covenants contained herein; and (iii) certifying that all conditions precedent
of Company and Shareholders to the Closing have been satisfied;
(g) a certificate of the Secretary of Company certifying as to the
incumbency of the directors and officers of Company and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Company;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Company and any state of required
foreign qualification of Company establishing that Company is in existence and
is in good standing to transact business in its state of incorporation;
(i) an opinion of counsel to Company and Shareholder opining as to
the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Company, the enforceability of this Agreement and the other agreements and
documents to be executed in connection herewith, and other matters reasonably
requested by Pentegra;
(j) non-foreign affidavits executed by Company;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
<PAGE>
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall
deliver to Company and Shareholders, the following, all of which shall be in a
form satisfactory to counsel to Company and Shareholders and shall be held by
Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing,
pursuant to an escrow agreement or letter agreement in form and substance
mutually acceptable to the parties hereto:
(a) the Merger Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance of
this Agreement and all related documents and agreements each certified by the
Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii) certifying
that all conditions precedent of Pentegra to the Closing have been satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and the
State of incorporation of Company;
(h) an opinion of counsel to Pentegra opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Pentegra, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Company;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Company to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in
any Exhibit attached hereto, any agreement executed pursuant hereto, and any
certificate executed and delivered by any party pursuant to the terms of this
Agreement, shall constitute representations and warranties of Company and
Shareholders, jointly and severally, or of Pentegra, as the case may be. All
such representations and warranties, and all representations and warranties
expressly labeled as such in this Agreement shall survive the date of this
Agreement and the Closing Date for a period of five (5) years following the
Closing Date, except that (i) the representations and warranties with respect to
environmental and medical waste laws and
<PAGE>
health care laws and matters shall survive for a period of fifteen (15) years
and tax representations shall survive until one year after the expiration of
the applicable statute of limitations. Each party covenants with the other
parties not to make any claim with respect to such representations and
warranties, against any party after the date on which such survival period
shall terminate. No party shall be entitled to claim indemnity from any
other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has
timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the
case may be. Each party hereby releases, acquits and discharges the other
party from any and all claims and demands, actions and causes of action,
damages, costs, expenses and rights of setoff with respect to which the
notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely
provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2
AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS
FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS,
COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES
AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY
PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF,
OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR
TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3
AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND
SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS,
DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING,
<PAGE>
INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT
APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST
ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS,
DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER
THE CLOSING DATE,
(D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL
LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION
ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS
RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER
THE CLOSING DATE,
(E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY
RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A
RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE
NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND
PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS
SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION
STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR
SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED
OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS
SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO
<PAGE>
MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the defense
of such action or proceeding, such Indemnified Person shall notify Indemnitor
thereof. If any such action or other proceeding shall be brought against any
Indemnified Person, Indemnitor shall, upon written notice given within a
reasonable time following receipt by Indemnitor of such notice from Indemnified
Person, be entitled to assume the defense of such action or proceeding with
counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person;
provided, however, that any Indemnified Person may at its own expense retain
separate counsel to participate in such defense. Notwithstanding the foregoing,
Indemnified Person shall have the right to employ separate counsel at
Indemnitor's expense and to control its own defense of such action or proceeding
if, in the reasonable opinion of counsel to such Indemnified Person, (a) there
are or may be legal defenses available to such Indemnified Person or to other
Indemnified Persons that are different from or additional to those available to
Indemnitor and which could not be adequately advanced by counsel chosen by
Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor
and such Indemnified Person that would make such separate representation
advisable; provided, however, that in no event shall Indemnitor be required to
pay fees and expenses hereunder for more than one firm of attorneys of
Indemnified Person in any jurisdiction in any one action or proceeding or group
of related actions or proceedings. Indemnitor shall not, without the prior
written consent of any Indemnified Person, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding to which such Indemnified Person is a party unless such settlement,
compromise or consent includes an unconditional release of such Indemnified
Person from all liability arising or potentially arising from or by reason of
such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Company or any Shareholder giving
rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra
shall be entitled to offset the amount of damages incurred by it as a result
of such breach of warranty, representation, covenant or agreement against any
amounts payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Company
or any Shareholder contained in this Agreement or in any certificate or other
document executed and delivered by Company or any Shareholder pursuant to this
Agreement is or becomes untrue or breached in any material respect or if Company
or any Shareholder fails to comply in any material respect with any covenant or
agreement contained herein, and any such misrepresentation, noncompliance or
breach is not cured, waived or eliminated within twenty (20) days after receipt
of written notice thereof;
(c) at any time by Company or any Shareholder if any representation or
warranty of Pentegra
<PAGE>
contained in this Agreement or in any certificate or other document executed
and delivered by Pentegra pursuant to this Agreement is or becomes untrue or
breached in any material respect or if Pentegra fails to comply in any
material respect with any covenant or agreement contained herein and such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra, Shareholders or Company if the transaction contemplated
hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Company, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date,
Shareholder shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of
Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer shall
be treated as effective for any purpose or (b) engage in any transaction,
whether or not with respect to any shares of Pentegra Common Stock or any
interest therein, the intent or effect of which is to reduce the risk of owning
shares of Pentegra Common Stock. The certificates evidencing the Pentegra
Common Stock delivered to Company pursuant to the terms hereof will bear a
legend substantially in the form set forth below and containing such other
information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the
shares of Pentegra Common Stock to be delivered to Company pursuant to this
Agreement have not been and will not be registered under the Securities Act of
1933 and may not be resold without compliance with the Securities Act of 1933.
The Pentegra Common Stock to be acquired by Shareholders pursuant to this
Agreement is being acquired solely for its own account, for investment purposes
only and with no present intention of distributing, selling or otherwise
disposing of it in connection with a distribution. Each Shareholder covenants,
warrants and represents that none of the shares of Pentegra Common Stock issued
to it will be offered, sold, assigned, pledged, hypothecated, transferred or
otherwise disposed of except after full compliance with all of the applicable
provisions of the Securities Act, as amended, and the rules and regulations of
the Securities Exchange Commission and applicable state securities laws and
regulations. All certificates evidencing shares of Pentegra Common Stock shall
bear the following legend in addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
<PAGE>
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Company resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the
economic risk of an investment in Pentegra Common Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and
have such knowledge and experience in financial and business matters that they
are capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect their own interests in connection with
the acquisition of the Pentegra Common Stock. Shareholders and their
representatives have had an adequate opportunity to ask questions and receive
answers from the officers of Pentegra concerning any and all matters relating to
the background and experience of the officers and directors of Pentegra, the
plans for the operations of the business of Pentegra, and any plans for
additional acquisitions and the like. Shareholders and their representatives
have asked any and all questions in the nature described in the preceding
sentence and all questions have been answered to their satisfaction.
Shareholders are "accredited investors" as defined in Regulation D of the
Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Company and Shareholders agree that it will not disclose
such confidential information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, unless (i) such information
becomes available to or known by the public generally through no fault of
Company or Shareholders, (ii) disclosure is required by law or the order of any
governmental authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (ii), Company and Shareholders shall, if
possible, give prior written notice thereof to the other parties hereto, and
provide such other parties hereto with the opportunity to contest such
disclosure, (iii) Company and Shareholders reasonably believe that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party, or (iv) Company and Shareholders are the sole and exclusive
owner of such confidential information as a result of the transactions
contemplated hereunder or otherwise. In the event of a breach or threatened
breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra
shall be entitled to an injunction restraining Company and Shareholders from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting Pentegra from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
The obligations of the parties under this SECTION 13 shall survive the
termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement will qualify as a reorganization within the meaning of Section
368(a) of the Code. The tax returns (and schedules thereto) of Shareholders,
Company and Pentegra shall be filed in a manner consistent with such intention
and Shareholders and Pentegra shall each provide the other with such tax
information, reports, returns or schedules as may be reasonably required to
assist the other in so reporting the transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery, or by
facsimile AND overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
<PAGE>
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Company and Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this Agreement,
whether or not such transactions are consummated. Without limiting the
generality of the foregoing and whether or not such liabilities may be deemed to
have been incurred in the ordinary course of business, Pentegra shall not be
liable to or required to pay, either directly or indirectly, any fees and
expenses of legal counsel, accountants, auditors or other persons or entities
retained by Company or any Shareholder for services rendered in connection with
negotiating and closing the transactions contemplated by this Agreement or the
documents to be executed in connection herewith, whether or not such costs or
expenses are incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure, either
written or oral, regarding the transactions contemplated by this Agreement
without the prior written consent of the other party, provided that the
foregoing shall not prohibit any disclosure (a) by press release, filing or
otherwise that Pentegra has determined in good faith judgment to be required by
Federal securities laws or the rules of the National Association of Securities
Dealers, (b) to attorneys, accountants, investment bankers or other agents of
the parties assisting the parties in connection with the transactions
contemplated by this Agreement, and (c) by Pentegra in connection with the
conduct of its Initial Public Offering and conducting an examination of the
<PAGE>
operations and assets of Company.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are
integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and not
only in connection with the specific representation in which they are explicitly
referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS
ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY
AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR
ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one and the same
instrument.
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any entity
that, through one or more intermediaries is, controlled, controlled by or under
common control with, Pentegra. Upon any such assignment prior to the Closing,
all references herein to Pentegra (including those to Pentegra Common Stock)
shall be deemed to include references to the assignee and the assignee's common
stock. Notwithstanding any such assignment, Pentegra shall not, absent a
written release from Company, be relieved from its obligations to Company under
this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Company, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Company and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Company or may demand from Company, and Company agrees
<PAGE>
to pay, the amount necessary to correct the estimate and proration made at
Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing, and
signed by the parties hereto. The waiver of any of the terms and conditions of
this Agreement shall not be construed as a waiver of any other terms and
conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the Company
or Shareholders (hereinafter referred to as a "Party"), whether made before or
after the institution of any legal proceeding, any dispute among the parties
hereto in any way arising out of, related to, or in connection with this
Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in
accordance with the terms of this Section (hereinafter the "Arbitration
Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in accordance
with the terms of this Arbitration Program, the Commercial Arbitration Rules of
the AAA. In the event of any inconsistency between this Arbitration Program and
those rules or statutes, then the terms of this Arbitration Program shall
control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been completed
and the arbitrators have determined each party's post-arbitration obligations
and responsibilities as it relates to such warranties and covenants. No
provision of, nor the exercise of any rights under, this Arbitration Program
shall limit the right of any Party at any time to seek or use ancillary or
preliminary judicial or non-judicial self help remedies for the purposes of
obtaining, perfecting, preserving, or foreclosing upon any personal property in
which there has been granted a security interest or lien by a Party in the
Documents. In Disputes involving indebtedness or other monetary obligations,
each Party agrees that the other Party may proceed against all liable persons,
jointly and severally against one or more of them, without impairing rights
against other liable persons. Nor shall a Party be required to join the
principal obligor or any other liable persons (e.g., sureties or guarantors) in
any proceeding against a particular person. A Party may release or settle with
one or more liable persons as the Party deems fit without releasing or impairing
rights to proceed against any persons not so released. All statutes of
limitation that would otherwise be applicable shall apply to any arbitration
proceeding.
The party seeking arbitration shall notify the other Party, in writing, of
that Party's desire to arbitrate a dispute; and each Party shall, within twenty
(20) days from the date such notification is received, select an arbitrator, and
those two arbitrators shall select a third arbitrator within ten (10) days
thereafter. The issues or claims in dispute shall be committed to writing,
separately stated and numbered, and each party's proposed answers or contentions
shall be signed below the questions. Failure by a party to select an arbitrator
within the prescribed time period shall serve as that Party's acquiescence and
acceptance of the other party's selection of arbitrator. The arbitrators shall
resolve all Disputes in accordance with the applicable substantive law. Any
Dispute shall be decided by a majority vote of three arbitrators, unless the
claim or amount in controversy does not exceed $100,000.00, in which case a
single arbitrator (who shall have authority to render a maximum award of
$100,000.00, including all damages of any kind, costs and fees) may decide the
Dispute. The arbitrators may grant any remedy or relief that the arbitrators
deem just and equitable and within the scope of this Arbitration Program. The
arbitrators may also grant such ancillary relief as is necessary to make
effective the award. In all arbitration proceedings the arbitrators shall make
specific and written findings of fact and conclusions of law. In all
arbitration proceedings in which the amount in controversy exceeds $100,000.00,
in the aggregate, the Parties shall have in addition to the statutory right to
seek vacation or modification of any award pursuant to applicable law, the right
to seek vacation or modification of any award that is based in whole, or in
part, on an incorrect or erroneous ruling of law by appeal to an appropriate
court having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must be
filed in a court having jurisdiction over the Dispute within 15 days from the
date the award in rendered. The arbitrators' findings of fact shall be binding
on all Parties and shall not be subject to further review except as otherwise
allowed by applicable law.
<PAGE>
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in writing
by the Parties or, in the absence of such agreement in Phoenix, Arizona or the
headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this
Arbitration Program shall survive any termination, amendment, or expiration of
the Documents, unless the Parties otherwise expressly agree in writing making
specific reference to this Arbitration Program. To the extent permitted by
applicable law, the arbitrator shall have the power to award recovery of all
costs and fees (including attorney's fees, administrative fees, and arbitrators'
fees) to the prevailing Party. This Arbitration Program may be amended,
changed, or modified only by a writing which specifically refers to this
Arbitration Program and which is signed by all the Parties. If any term,
covenant, condition or provision of the Arbitration Program is found to be
unlawful or invalid or unenforceable, such illegality or invalidity or
unenforceable shall not affect the legality, validity or enforceability of the
remaining parts of this Arbitration Program, and all such remaining parts hereof
shall be valid and enforceable and have full force and effect as if the illegal,
invalid or unenforceable part had not been included. Each Party agrees to keep
all Disputes and arbitration proceedings strictly confidential, except for
disclosures of information required in the ordinary course of business of the
Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be found
to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect. In lieu of such
provision, there shall be added automatically as part of this Agreement, a
provision as similar in its terms to such provision as may be possible and be
legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
James H. Clarke, Jr., D.D.S., Inc.
By: /s/ James H. Clarke, Jr., D.D.S.
------------------------------------
Its: President
------------------------------------
PENTEGRA DENTAL GROUP, INC.
By: /s/ James L. Dunn, Jr.
------------------------------------
Its: Senior Vice-President
------------------------------------
/s/ James H. Clarke, Jr., D.D.S.
-----------------------------------------
James H. Clarke, Jr., D.D.S.
<PAGE>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
Annex I Merger Consideration
A Target Companies
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment
Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
4.16 Excluded Assets and Excluded Liabilities
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
and
HENRY CUTTLER, D.D.S.
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . 3
2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . 3
2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . 3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . 3
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . 3
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . 6
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . 6
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . 6
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 7
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . 7
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . 7
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 7
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . 8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . 8
3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 8
Section 4. COVENANTS OF DENTIST.
4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 9
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . 9
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . 9
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . 10
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . 10
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . 10
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . 10
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . 10
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . 10
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . . . 10
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . 11
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . 11
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 11
Section 6. COVENANTS OF PENTEGRA AND DENTIST
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 12
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . 12
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . 12
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . 12
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . 12
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8. DENTIST'S CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 13
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . 13
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . 13
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9. CLOSING DELIVERIES
<PAGE>
9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . 15
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . 15
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . . . 16
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . 17
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . 18
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . 19
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . 20
14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . 20
14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . 20
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . 21
14.12 NO RULE OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . 21
14.13 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . 21
14.14 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.15 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . 21
14.16 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.17 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed
effective August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra") and HENRY CUTTLER, D.D.S. ("Dentist").
WITNESSETH:
WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires
to receive from Dentist, certain assets of Dentist;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Dentist, the "Target Companies");
WHEREAS, it is intended for Federal income tax purposes that the
transfers contemplated by this Agreement, the Other Agreements and Pentegra's
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an
exchange within the meaning of Section 351 of the Internal Revenue Code of
1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and
conditions contained herein, on the Closing Date, Dentist shall convey,
transfer, deliver and assign to Pentegra or any affiliate of Pentegra
designated by Pentegra all of Dentist's right, title and interest in and to
those certain assets described on EXHIBIT 1.1 attached hereto (individually,
"Asset", and collectively "Assets"), free and clear of all obligations,
security interests, claims, liens and encumbrances, except as specifically
assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof.
<PAGE>
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and contributed hereunder, and Dentist shall retain all of its
right, title and interest in and to, the assets not specifically transferred
hereunder, including without limitation, the assets described on EXHIBIT 1.2
(the "Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for
the Assets and the representations, warranties and agreements of Dentist
contained herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Dentist the consideration
specified in ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b)
attached hereto to the extent that such obligations, commitments, liabilities
and indebtedness are current and not otherwise in default. (the "Assumed
Liabilities"). Notwithstanding any contrary provision contained herein,
Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i)
any liability, commitment or obligation or trade payable or indebtedness not
specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on
EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default
under such contracts, leases, commitments or obligations which occurred on or
before the Closing Date; (iii) any liability for any employee benefits
payable to employees of Dentist, including, but not limited to, liabilities
arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any
liability based upon or arising out of a violation of any antitrust or
similar restraint-of-trade laws by Dentist, including, without limiting the
generality of the foregoing, any such antitrust liability which may arise in
connection with agreements, contracts, commitments or orders for the sale of
goods or provision of services by Dentist reflected on the books of Dentist
at or prior to the Closing Date; (v) any liability based upon or arising out
of any tortious or wrongful actions of Dentist, any licensed professional
employee or independent contractor of Dentist, (vi) any liability for the
payment of any taxes of Dentist, including without limitation, sales, use and
other transfer taxes and income taxes arising from or by reason of the
transactions contemplated by this Agreement; (vii) any indebtedness secured
by deeds of trust or mortgages on real property; nor (viii) any liability
incurred or to be incurred pursuant to any malpractice or other suits or
actions pending against Dentist.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date,
Pentegra shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in Pentegra its
right, title or interest in, to or under any of the Assets or otherwise to
carry out this Agreement, in return for the consideration set forth in this
Agreement, the Dentist shall execute and deliver all such deeds, bills of
sale, assignments and assurances and take and do all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under the Assets in Pentegra or
otherwise to carry out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
Dentist hereby represents and warrants to Pentegra as follows:
2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the
State of New York. Dentist does not have any assets, employees or offices in
any state other than the state set forth in the first sentence of this
SECTION 2.1.
2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into
and perform this Agreement and the other agreements to be executed and
delivered in connection herewith. This Agreement
<PAGE>
and all agreements and documents executed and delivered in connection
herewith have been, or will be as of the Closing Date, duly executed and
delivered by Dentist and constitute or will constitute the legal, valid and
binding obligations of Dentist in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of
consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, result in the acceleration of, any obligation
under any mortgage, lien, lease, agreement, rent, instrument, order,
arbitration award, judgment or decree to which Dentist is a party or by which
Dentist is bound, or violate any material restrictions of any kind to which
Dentist is subject, or result in any lien or encumbrance on any of Dentist's
assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to
the knowledge of Dentist, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Dentist.
2.5 [INTENTIONALLY DELETED].
2.6 [INTENTIONALLY DELETED].
2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any
related unaudited statements of income, retained earnings, schedule of
accounts receivable, accounts payable and accrued liabilities, and cash flows
for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Dentist as of
the dates and for the periods indicated and reflect all fixed and contingent
liabilities of Dentist.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all
leases pursuant to which Dentist leases, as lessor or lessee, real or
personal property used in operating the Business, related to the Assets or
otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable
in accordance with their respective terms, and there is not under any such
lease any existing default by Dentist, as lessor or lessee, or any condition
or event of which Dentist has knowledge which with notice or lapse of time,
or both, would constitute a default, in respect of which Dentist has not
taken adequate steps to cure such default or to prevent a default from
occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Dentist has no knowledge of any
latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and
marketable title to all
<PAGE>
of the Assets, free and clear of any liens, claims, charges, exceptions or
encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10
attached hereto. Dentist shall cause all encumbrances set forth on EXHIBIT
2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be
released or terminated prior to the Closing Date and evidence of such
releases of liens and claims shall be provided to Pentegra on the Closing
Date and the Assets shall not be used to satisfy such liens, claims or
encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned or
used by Dentist, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on
EXHIBIT 2.12, Dentist has no right, title or interest in or to patents,
patent rights, corporate names, assumed names, manufacturing processes, trade
names, trademarks, service marks, inventions, specialized treatment
protocols, copyrights, formulas and trade secrets or similar items. Set
forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies
of Dentist, including the names of any entities from whom Dentist previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Dentist in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Dentist has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the most recent payroll report of Dentist, showing
all current employees of Dentist and their current levels of compensation,
(b) promised increases in compensation of employees of Dentist that have not
yet been effected, (c) oral or written employment agreements, consulting
agreements or independent contractor agreements (and all amendments thereto)
to which Dentist is a party, copies of which have been delivered to Pentegra,
and (d) all employee manuals, materials, policies, procedures and
work-related rules, copies of which have been delivered to Pentegra. Dentist
is in compliance with all applicable laws, rules, regulations and ordinances
respecting employment and employment practices. Dentist has not engaged in
any unfair labor practice. There are no unfair labor practices charges or
complaints pending or threatened against Dentist, and Dentist has never been
a party to any agreement with any union, labor organization or collective
bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the
Assets is subject to any pending, nor does Dentist have knowledge of any
threatened, litigation, governmental investigation, condemnation or other
proceeding against or relating to or affecting Dentist, the Business, the
Assets or the transactions contemplated by this Agreement, and, to the
knowledge of Dentist, no basis for any such action exists, nor is there any
legal impediment of which Dentist has knowledge to the continued operation of
its business or the use of the Assets in the ordinary course, subject to
consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Dentist ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted or may be made
by any party thereto.
<PAGE>
Except as indicated on such Exhibits, there is not under any such Contract
any existing default by Dentist, or any condition or event of which Dentist
has knowledge which with notice or lapse of time, or both, would constitute a
default. Dentist has no knowledge of any default by any other party to such
Contracts. Dentist has not received notice of the intention of any party to
any Contract to cancel or terminate any Contract and have no reason to
believe that any amendment or change to any Contract is contemplated by any
party thereto. Other than those contracts, obligations and commitments
listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist is not a party
to any material written or oral agreement contract, lease or arrangement,
including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
the Dentist, oral or written, that provide for prepayments or deferred
installment payments; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Dentist on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16,
Dentist has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(c) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
<PAGE>
(d) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(e) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Dentist since the Balance Sheet
Date;
(f) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(g) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(h) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(i) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(j) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(k) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties,
assets or business or the Business or the Assets, or experienced any other
material adverse change in its financial condition, assets, prospects,
liabilities or business; or
(l) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Dentist has filed all tax returns (including tax
reports and other statements) required to have been filed by it, and has paid
all taxes (including any interest, penalty or additions thereto) required to
have been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Dentist has not received any notice that any tax deficiency or
delinquency has been or may be asserted against Dentist. There are no
audits relating to taxes of Dentist pending or in process or, to the
knowledge of Dentist, threatened. Dentist is not currently the beneficiary of
any waiver of any statute of limitations in respect of taxes nor of any
extension of time within which to file any tax return or to pay any tax
assessment or deficiency. There are no liens or encumbrances relating to
taxes on or threatened against any of the assets of Dentist. Dentist has
withheld and paid all taxes required by law to have been withheld and paid by
it. Neither Dentist nor any predecessor of Dentist is or has been a party to
any tax allocation or sharing agreement or a member of an affiliated group of
corporations filing a consolidated Federal income tax return. Dentist has
delivered to Pentegra correct and complete copies of Dentist's three most
recently filed annual state, local and Federal income tax returns, together
with all examination reports and statements of deficiencies assessed against
or agreed to by Dentist during the three calendar year period preceding the
date of this Agreement. Dentist has neither made any payments, is obligated
to make any payments, or is a party to any agreement that under any
circumstance could obligate it to make any payments that will not be
deductible under Code section 280G.
(b) Dentist does not intend to dispose of any of the shares of Pentegra
Common Stock to be received hereunder and is not a party to any plan,
arrangement or agreement for the disposition of such shares.
<PAGE>
Nothing contained herein shall prohibit Dentist from selling such shares of
Pentegra Common Stock after the designated holding period and in accordance
with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage
commissions or finder's or similar fees in connection with the transactions
contemplated by this Agreement which may be now or hereafter asserted against
Pentegra, Dentist resulting from any action taken by Dentist or their
respective agents or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Dentist did not have, as of the Balance Sheet
Date, and has not incurred since that date and will not have incurred as of
the Closing Date, any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
other than those incurred in the ordinary course of business or as set forth
on EXHIBIT 2.16. Dentist does not know, or have reasonable grounds to know,
of any basis for the assertion against Dentist as of the Balance Sheet Date,
of any claim or liability of any nature in any amount not fully reflected or
reserved against on the Balance Sheet, or of any claim or liability of any
nature arising since that date other than those incurred in the ordinary
course of business or contemplated by this Agreement. All indebtedness of
Dentist (including without limitation, indebtedness for borrowed money,
guaranties and capital lease obligations) is described on EXHIBIT 2.19
attached hereto.
2.20 INSURANCE POLICIES. Dentist and each licensed professional of
Dentist carries property, liability, malpractice, workers' compensation and
such other types of insurance as is customary in the industry. Valid and
enforceable policies in such amounts are outstanding and duly in force and
will remain duly in force through the Closing Date. All such policies are
described in EXHIBIT 2.20 attached hereto and true and correct copies have
been delivered to Pentegra. Dentist has not received notice or other
communication from the issuer of any such insurance policy cancelling or
amending such policy or threatening to do so. Neither Dentist nor any
licensed professional employee of Dentist has any outstanding claims,
settlements or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Dentist has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist
Plan," and collectively "Dentist Plans") have been operated and administered
in all material respects in accordance with all applicable laws, rules and
regulations, including without limitation, ERISA, the Internal Revenue Code
of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment
Act of 1967, as amended, and the related rules and regulations adopted by
those Federal agencies responsible for the administration of such laws. No
act or failure to act by Dentist has resulted in a "prohibited transaction"
(as defined in ERISA) with respect to the Dentist Plans. No "reportable
event" (as defined in ERISA) has occurred with respect to any of the Dentist
Plans. Dentist has not previously made, is not currently making, and is not
obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Dentist Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at least equal to the
value of plan liabilities or (ii) the value of plan liabilities in excess of
plan assets is disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or
<PAGE>
otherwise), operations, assets, liabilities, business or prospects of
Dentist, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed
professional employees, and the conduct of the Business and use of the
Assets, have complied with all applicable laws, rules, regulations and
licensing requirements, including, without limitation, the Federal
Environmental Protection Act, the Occupational Safety and Health Act, the
Americans with Disabilities Act and any environmental laws and medical waste
laws, and there exist no violations by Dentist or any licensed professional
employee of Dentist of any Federal, state or local law or regulation.
Dentist has not received any notice of a violation of any Federal, state and
local laws, regulations and ordinances relating to the operations of the
Business and Assets and no notice of any pending inspection or violation of
any such law, regulation or ordinance has been received by Dentist.
2.24 THIRD PARTY PAYORS. Dentist and each licensed professional
employee or independent contractor of Dentist has timely filed all claims or
other reports required to be filed with respect to the purchase of services
by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are
no pending appeals, overpayment determinations, adjustments, challenges,
audit, litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Dentist and each
licensed professional employee of Dentist. Neither Dentist nor any licensed
professional employee of Dentist has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Dentist and Dentist's licensed professional employees has not (a) knowingly
and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Dentist in this Agreement, and no Exhibit or certificate issued or executed
by, or information furnished by Dentist or to be furnished by Dentist to
Pentegra pursuant hereto, or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
or facts contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Dentist has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer
or employee or family member of Dentist, or their respective spouses,
children or affiliates, owns directly or indirectly, on an individual or
joint basis, any interest in, has a compensation or other financial
arrangement with, or serves as an officer or director of, any customer or
supplier or competitor of Dentist or any organization that has a material
contract or arrangement with Dentist.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Dentist's services which
accounted for more than 10% of revenues of Dentist in the preceding fiscal
year. Dentist has good relations with all such payors and other material
payors of Dentist and none of such payors has notified Dentist that it
intends to discontinue its relationship with Dentist or to deny
<PAGE>
any claims submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Dentist as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would
not have a material adverse effect, there are no proceedings pending or, to
the knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has knowledge to the continued operation of its business or the use
of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
<PAGE>
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Dentist pursuant
hereto, or in connection with the transactions contemplated hereby, contains
or will contain any untrue statement of a material fact, or omits or will
omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
SECTION 4. COVENANTS OF DENTIST.
Dentist agrees that between the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and conditions. Dentist agrees to complete the
Exhibits hereto to be provided by him in form and substance satisfactory to
Pentegra.
4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use
the Assets in the ordinary course. Dentist shall not enter into any lease,
contract, indebtedness, commitment, purchase or sale or acquire or dispose of
any capital asset relating to the Business or the Assets except in the
ordinary course of business. Dentist shall use their best efforts to
preserve the Business and Assets intact and shall not take any action that
would have an adverse effect on the Business or Assets. Dentist shall use
their best efforts to preserve intact the relationships with payors,
customers, suppliers, patients and others having significant business
relations with Dentist. Dentist shall collect its receivables and pay its
trade payables in the ordinary course of business. Dentist shall not
introduce any new method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its
authorized representatives access to, and make available for inspection, all
of the assets and business of Dentist, the Business and the Assets, including
employees, customers and suppliers and permit Pentegra and its authorized
representatives to inspect and make copies of all documents, records and
information with respect to the business or assets of Dentist, the Business
or the Assets as Pentegra or its representatives may request. Dentist shall
promptly notify Pentegra in writing of (a) any notice or communication
relating to a default or event that, with notice or lapse of time or both,
could become a default, under any contract, commitment or obligation to which
Dentist is a party or relating to the Business or the Assets, and (b) any
adverse change in Dentist's or the Business' financial condition or the
Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall
use his best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby,
including consents described on EXHIBIT 2.4. Dentist shall use his best
efforts to obtain all licenses, permits, approvals or other authorizations
required under any law, rule, regulation, or otherwise to
<PAGE>
provide the services of the Practice contemplated by the Service Agreement
and to conduct the intended business of the Practice and operate the Business
and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance
with the provisions hereof, Dentist shall not, and shall use its best efforts
to cause Dentist's employees, agents and representatives not to, initiate,
solicit or encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer, including without limitation, any
proposal or offer to the Dentist, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of Dentist or
engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to
such proposal or offer, and Dentist will immediately cease any such
activities, discussions or negotiations heretofore conducted with respect to
any of the foregoing. Dentist shall immediately notify Pentegra if any such
inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Dentist or any entity might have any liability whatsoever
arising from any insurance, pension plan, employment tax or similar
liability of Dentist to any employee or other person or entity (including,
without limitation, any Dentist Plan and any liability under employment
contracts with Dentist) allocable to services performed prior to the Closing
Date. Dentist acknowledges that the purpose and intent of this covenant is
to assure that Pentegra shall have no liability whatsoever at any time after
the Closing Date with respect to any of Dentist's employees or similar
persons or entities, including, without limitation, any Dentist Plan for the
period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash
compensation of the Dentist (other than in the ordinary course of business)
or other employee or an independent contractor of Dentist, adopt, amend or
terminate any compensation plan, employment agreement, independent contractor
agreement, employee policies and procedures or employee benefit plan, take
any action that could deplete the assets of any employee benefit, or fail to
pay any premium or contribution due or file any report with respect to any
employee benefit plan, or take any other actions with respect to its
employees or employee matters which might have an adverse effect upon
Dentist, its business, assets or prospects.
4.8 [INTENTIONALLY OMITTED].
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best
efforts to take, or cause to be taken, all actions necessary to effect the
acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any
material respect the tax or financial accounting methods or practices
followed by Dentist (including any material change in any assumption
underlying, or any method of calculating, any bad debt, contingency or other
reserve), except as may be required by law or generally accepted accounting
principles. Dentist will duly, accurately and timely (without regard to any
extensions of time) file all returns, information statements and other
documents relating to taxes of Dentist required to be filed by it, and pay
all taxes required to be paid by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby
waive any compliance with the applicable state Bulk Transfers Act, if any.
Dentist covenants and agrees that all of the creditors with respect to the
Business and the Assets will be paid in full by Dentist prior to the Closing
Date, except to extent that any liability to such creditors is assumed by
Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall
furnish Pentegra with proof of payment of all creditors with respect to the
Business and
<PAGE>
the Assets. Notwithstanding the foregoing, Dentist may dispute the validity
or amount of any such creditor's claim without being deemed to be in
violation of this SECTION 4.11, provided that such dispute is in good faith
and does not unreasonably delay the resolution of the claim and provided,
further that Dentist agrees to indemnify and bond Pentegra for such amounts
as is satisfactory to Pentegra.
4.12 LEASE. If Dentist leases any of its premises from the Dentist or
other affiliate of Dentist, Pentegra shall have entered into a building lease
(the "Building Lease") with the owner of such premises on terms and
conditions satisfactory to Pentegra, the terms and conditions of which shall
include, without limitation, (i) a five year initial term plus three
five-year renewal options, (ii) a lease rate equal to the fair market value
lease rate, as agreed to by Pentegra, and (iii) such other provisions to be
acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests
made by Pentegra for the purpose of allowing Pentegra to hire those
non-dental employees of Dentist designated by Pentegra, such employment to be
effective as of the Closing Date. Notwithstanding the above, Dentist shall
remain liable under any Dentist Plans for any claims incurred by any
employees or their spouses or dependents, and for all compensation, bonuses,
benefits and other such items and other liabilities related to Dentist's
employees incurred by Dentist prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all
employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall
be treated as "leased employees" (as defined in Code Section 414(n)) of
Dentist and shall be treated as Clinic employees for purposes of eligibility
and participation in Dentist Plans.
4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective
as of the Closing Date.
4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited
liability company, partnership or other legal entity (the "Practice")
approved by Pentegra for the purpose of practicing dentistry and entering
into the Service Agreement. The Practice shall be duly organized, in
existing and in good standing under the laws of the State in which the
Dentist and the Practice are to practice dentistry. The Practice shall have
all necessary power to own all of its assets and to carry on its business as
such business is now being conducted. The Dentist shall be the sole
member/shareholder/partner of the Practice and own all such interests free of
all security interests, claims, encumbrances and liens. Each interest in the
Practice shall be legally and validly issued and fully paid and
nonassessable. There shall be no outstanding (a) bonds, debentures, notes or
other obligations the holders of which have the right to vote with the
members/partners/shareholders of the Practice on any matter, (b) securities
of the Practice convertible into equity interests in the Practice, or (c)
commitments, options, rights or warrants to issue any such equity interests
in the Practice, to issue securities of the Practice convertible into such
equity interests, or to redeem any securities of the Practice. No interests
of the Practice shall have been issued or disposed of in violation of the
preemptive rights, rights of first refusal or similar rights of any of the
Practice's members/partners/shareholders. The Practice shall quality to do
business as a foreign entity in any other state or jurisdiction by reason of
its business, properties or activities in or relating to such other state or
jurisdiction.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation,
Bylaws/Regulations and minutes of thePractice and all amendments thereto of
the Practice shall have been delivered to Pentegra and shall be in form and
substance satisfactory to Pentegra. The minute books of the Practice shall
contain all accurate minutes of the meetings of and consents to actions taken
without meetings of the members\managers/partners/board of directors of the
Practice since its formation. The books of account of the Practice shall
have been kept accurately in the ordinary course of business and the
revenues, expenses, assets and liabilities of the Practice shall have been
properly recorded in such books.
<PAGE>
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements
and other documents to be executed and delivered by it pursuant to this
Agreement, including without limitation, the Service Agreement and each
Employment Agreement or to be executed and delivered on the Closing Date, and
has taken all action required by law, its Organization/Partnership
Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to
authorize the execution, delivery and performance of such documents. The
Service Agreement, the Employment Agreement and the other agreements
contemplated hereby shall have been duly executed and delivered by the
Practice and constitute or will constitute the legal, valid and binding
obligations of the Practice enforceable against the Practice in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of the
Service Agreement, the Employment Agreements and the other agreements
contemplated hereby will not violate any provision of the organizational
documents of the Practice or any provisions of, or result in the acceleration
of, any obligation under any mortgage, lien, lease, agreement, rent,
instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any
material restrictions of any kind to which the Practice is subject, or result
in any lien or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and has filed with
the proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra
shall use its best efforts to secure all necessary approvals and consents of
third parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND DENTIST.
Pentegra and Dentist agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to
promptly prepare and file with the Securities Exchange Commission ("SEC")
the Registration Statement on Form S-1 (or other appropriate Form) to be
filed by Pentegra in connection with its Initial Public Offering (including
the prospectus constituting a part thereof, the "Registration Statement").
Pentegra shall obtain all necessary state securities laws or "Blue Sky"
permits and approvals required to carry out the transactions contemplated by
this Agreement and the Dentist shall furnish all information concerning
Dentist as may be reasonable requested in connection with any such action.
<PAGE>
Dentist represents and warrants that none of the information or documents
supplied or to be supplied by it specifically for inclusion in the
Registration Statement, by exhibit or otherwise, will, at the time the
Registration Statement and each amendment or supplement thereto, if any,
becomes effective under the Securities Act of 1933, 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, in light of
the circumstances under which they were made, not misleading. Dentist shall
be entitled to review the Registration Statement and each amendment thereto,
if any, prior to the time each becomes effective under the Securities Act of
1933.
Dentist shall furnish Pentegra will all information concerning itself and
such other matters as may be reasonable requested by Pentegra in connection
with the preparation of the Registration Statement and each amendment or
supplement thereto, or any other statement, filing, notice or application
made by or on behalf of each such party or any of its subsidiaries to any
governmental entity in connection with the transactions contemplated by the
Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Dentist contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Dentist prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Dentist shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Dentist, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service
Agreement"), in substantially the form attached hereto as EXHIBIT 7.7,
pursuant to which Pentegra will provide management services to the Practice.
Dentist shall have executed and delivered a Guaranty Agreement in
substantially the form attached as EXHIBIT 4.10 of the Service Agreement
pursuant to which Dentist shall, among other things, guaranty the obligations
of the Practice under the Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her
employment agreement and executed an employment agreement ("Employment
Agreement") with the Practice in form and
<PAGE>
substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to
Dentist and Pentegra.
7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary
government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables
or payables between Dentist and its affiliates and Dentist shall not have any
liabilities, including indebtedness, guaranties and capital leases, that are
not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Dentist shall have named Pentegra as an additional
insured on irs liability insurance program in accordance with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Dentist since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. DENTIST'S CONDITIONS PRECEDENT.
The obligations of Dentist hereunder are subject to fulfillment at or
prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pentegra contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Dentist shall have received all documents,
duly executed in form satisfactory to Dentist and its counsel, referred to in
SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all
<PAGE>
state securities and "Blue Sky" permits necessary to consummate the
transactions contemplated hereby. The Pentegra Common Stock shall have been
approved for listing on Nasdaq or other exchange selected by Pentegra,
subject only to official notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF DENTIST. Within five business days after requested by
Pentegra, Dentist shall deliver to Pentegra the following, all of which shall
be in a form satisfactory to counsel to Pentegra and shall be held by Jackson
& Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant
to an escrow agreement or letter agreement in form and substance mutually
acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreemen and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a bill of sale conveying the Assets to Pentegra;
(d) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(e) certificates of Dentist dated as of the Closing Date, (i) as to
the truth and correctness of the representations and warranties of Dentist
contained herein; (ii) as to the performance of and compliance by Dentist
with all covenants contained herein; and (iii) certifying that all conditions
precedent of Dentist to the Closing have been satisfied;
(f) an opinion of counsel to Dentist opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Dentist, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Pentegra;
(g) non-foreign affidavits executed by Dentist;
(h) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(i) an executed Registration Rights Agreement between Pentegra and
Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(j) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Dentist the following, all of which shall be in a form
satisfactory to counsel to Dentist and shall be held by Jackson & Walker,
L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an
escrow agreement or letter agreement in form and substance mutually
acceptable to the parties hereto:
(a) the Acquisition Consideration;
<PAGE>
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Dentist;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Dentist;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Dentist to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit attached hereto, any agreement executed pursuant hereto, and
any certificate executed and delivered by any party pursuant to the terms of
this Agreement, shall constitute representations and warranties of Dentist or
of Pentegra, as the case may be. All such representations and warranties,
and all representations and warranties expressly labeled as such in this
Agreement shall survive the date of this Agreement and the Closing Date for a
period of five (5) years following the Closing Date, except that (i) the
representations and warranties with respect to environmental and medical
waste laws and health care laws and matters shall survive for a period of
fifteen (15) years and tax representations shall survive until one year after
the expiration of the applicable statute of limitations. Each party
covenants with the other parties not to make any claim with respect to such
representations and warranties, against any party after the date on which
such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof,
unless such party has timely given the notice required in SECTION 10.2, 10.3
or 10.4 hereof, as the case may be. Each party hereby releases, acquits and
discharges the other party from any and all claims and demands, actions and
causes of action, damages, costs, expenses and rights of setoff with respect
to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable,
are not timely provided.
<PAGE>
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS
SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"),
SHALL INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE
EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND
AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS,
DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY,
AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE
FURNISHED BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION
10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS,
SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND
EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR
WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY,
AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO
BE FURNISHED BY INDEMNITOR HEREUNDER,
(B) [intentionally deleted]
<PAGE>
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES,
AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON
OR AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING
HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF
OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY
THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR
AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION,
PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR
THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(B), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED
TO PENTEGRA OR ITS COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY
PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING
A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT
OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL
FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE
THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after
Indemnified Person receives written notice of the commencement of any action
or other proceeding in respect of which indemnification or reimbursement may
be sought hereunder, or within such lesser time as may be provided by law for
the defense of such action or proceeding, such Indemnified Person shall
notify Indemnitor thereof. If any such action or other proceeding shall be
brought against any Indemnified Person, Indemnitor shall, upon written notice
given within a reasonable time following receipt by Indemnitor of such notice
from Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense
<PAGE>
retain separate counsel to participate in such defense. Notwithstanding the
foregoing, Indemnified Person shall have the right to employ separate counsel
at Indemnitor's expense and to control its own defense of such action or
proceeding if, in the reasonable opinion of counsel to such Indemnified
Person, (a) there are or may be legal defenses available to such Indemnified
Person or to other Indemnified Persons that are different from or additional
to those available to Indemnitor and which could not be adequately advanced
by counsel chosen by Indemnitor, or (b) a conflict or potential conflict
exists between Indemnitor and such Indemnified Person that would make such
separate representation advisable; provided, however, that in no event shall
Indemnitor be required to pay fees and expenses hereunder for more than one
firm of attorneys of Indemnified Person in any jurisdiction in any one action
or proceeding or group of related actions or proceedings. Indemnitor shall
not, without the prior written consent of any Indemnified Person, settle or
compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding to which such Indemnified Person is a
party unless such settlement, compromise or consent includes an unconditional
release of such Indemnified Person from all liability arising or potentially
arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Dentist giving rise to
indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be
entitled to offset the amount of damages incurred by it as a result of such
breach of warranty, representation, covenant or agreement against any amounts
payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of
Dentist contained in this Agreement or in any certificate or other document
executed and delivered by Dentist pursuant to this Agreement is or becomes
untrue or breached in any material respect or if Dentist fails to comply in
any material respect with any covenant or agreement contained herein, and any
such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
(c) at any time by Dentist if any representation or warranty of
Pentegra contained in this Agreement or in any certificate or other document
executed and delivered by Pentegra pursuant to this Agreement is or becomes
untrue or breached in any material respect or if Pentegra fails to comply in
any material respect with any covenant or agreement contained herein and such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra or Dentist if the transaction contemplated hereby shall
not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Dentist, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares
of Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and
<PAGE>
no such attempted transfer shall be treated as effective for any purpose or
(b) engage in any transaction, whether or not with respect to any shares of
Pentegra Common Stock or any interest therein, the intent or effect of which
is to reduce the risk of owning shares of Pentegra Common Stock. The
certificates evidencing the Pentegra Common Stock delivered to Dentist
pursuant to the terms hereof will bear a legend substantially in the form set
forth below and containing such other information as Pentegra may deem
necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the
shares of Pentegra Common Stock to be delivered to Dentist pursuant to this
Agreement have not been and will not be registered under the Securities Act
of 1933 and may not be resold without compliance with the Securities Act of
1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this
Agreement is being acquired solely for its own account, for investment
purposes only and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution. Dentist
covenants, warrants and represents that none of the shares of Pentegra Common
Stock issued to it will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after full compliance with all of
the applicable provisions of the Securities Act, as amended, and the rules
and regulations of the Securities Exchange Commission and applicable state
securities laws and regulations. All certificates evidencing shares of
Pentegra Common Stock shall bear the following legend in addition to the
legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock
shall bear any legend required by the securities or blue sky laws of any
state where Dentist resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the
economic risk of an investment in Pentegra Common Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and
has such knowledge and experience in financial and business matters that they
are capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect its own interests in connection with
the acquisition of the Pentegra Common Stock. Dentist and its
representatives have had an adequate opportunity to ask questions and receive
answers from the officers of Pentegra concerning any and all matters relating
to the background and experience of the officers and directors of Pentegra,
the plans for the operations of the business of Pentegra, and any plans for
additional acquisitions and the like. Dentist and its representatives have
asked any and all questions in the nature described in the preceding sentence
and all questions have been answered to their satisfaction. Dentist is an
"accredited investors" as defined in Regulation D of the Securities Act of
1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes
and acknowledges that it had in the past, currently have, and in the future
may possibly have, access to certain confidential information of Pentegra
that is valuable, special and unique assets of Pentegra's businesses.
Dentist agrees that it will not disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or
reason whatsoever, unless (i) such information becomes available to or known
by the public
<PAGE>
generally through no fault of Dentist, (ii) disclosure is required by law or
the order of any governmental authority under color of law, provided, that
prior to disclosing any information pursuant to this clause (ii), Dentist
shall, if possible, give prior written notice thereof to the other parties
hereto, and provide such other parties hereto with the opportunity to contest
such disclosure, (iii) Dentist reasonably believes that such disclosure is
required in connection with the defense of a lawsuit against the disclosing
party, or (iv) Dentist is the sole and exclusive owner of such confidential
information as a result of the transactions contemplated hereunder or
otherwise. In the event of a breach or threatened breach by Dentist of the
provisions of this SECTION 13, Pentegra shall be entitled to an injunction
restraining Dentist from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting Pentegra from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages. The obligations of the parties under this
SECTION 13 shall survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions
contemplated by this Agreement, together with the transactions contemplated
by the Other Agreement and the Initial Public Offering, will qualify as an
exchange meeting the requirements of Section 351 of the Code. The tax
returns (and schedules thereto) of Dentist and Pentegra shall be filed in a
manner consistent with such intention and Dentist and Pentegra shall each
provide the other with such tax information, reports, returns or schedules as
may be reasonably required to assist the other in so reporting the
transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Dentist:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
<PAGE>
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any
further acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Dentist for services rendered in
connection with negotiating and closing the transactions contemplated by this
Agreement or the documents to be executed in connection herewith, whether or
not such costs or expenses are incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Dentist.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one and the
same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and
shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or
<PAGE>
have any right under or by virtue of this Agreement. No party may assign any
right or obligation hereunder without the prior written consent of the other
parties; provided, however, that Pentegra may assign its rights and delegate
its obligations hereunder to any entity that is an affiliate of Pentegra.
For purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Dentist, be relieved from its obligations
to Dentist under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand,
or Dentist, on the other hand, file suit in any court against any other party
to enforce the terms of this Agreement against the other party or to obtain
performance by it hereunder, the prevailing party will be entitled to recover
all reasonable costs, including reasonable attorneys' fees, from the other
party as part of any judgment in such suit. The term "prevailing party" shall
mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a pro
rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist
(hereinafter referred to as a "Party"), whether made before or after the
institution of any legal proceeding, any dispute among the parties hereto in
any way arising out of, related to, or in connection with this Agreement
(hereinafter a "Dispute"), shall be resolved by binding arbitration in
accordance with the terms of this Section (hereinafter the "Arbitration
Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or foreclosing upon any
personal property in which there has been granted a security interest or lien
by a Party in the Documents. In Disputes involving indebtedness or other
monetary obligations, each Party agrees that the other Party may proceed
against all liable persons, jointly and severally against one or more of
them, without impairing rights against other liable persons. Nor shall a
Party be required to join the principal obligor or any other liable persons
(e.g., sureties or guarantors) in any proceeding against a particular person.
A Party may release or settle
<PAGE>
with one or more liable persons as the Party deems fit without releasing or
impairing rights to proceed against any persons not so released. All
statutes of limitation that would otherwise be applicable shall apply to any
arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoeniz,
Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or by
applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be found to
be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
----------------------------------
Its: Senior Vice President
---------------------------------
/s/ Henry Cuttler, DDS
--------------------------------------
Henry Cuttler, D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 [intentionally omitted]
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
EDWARD T. DOUGHERTY, JR., D.D.S., P.A.
and
EDWARD DOUGHERTY, JR., D.D.S.
<PAGE>
TABLE OF CONTENTS
PAGE
----
Section 1. TERMS OF THE REORGANIZATION
1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . 2
1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . 4
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . 9
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . .10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . .10
<PAGE>
Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . .10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . .10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . .10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . .10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . .11
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . .11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . .11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . .11
4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . .11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . .11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . .11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . .12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . .12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . .12
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . .12
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . .13
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . .13
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . .13
Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . .13
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . .14
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . .14
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . .14
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . .14
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . .14
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . .14
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . .14
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . .14
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . .14
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . .14
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . .15
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . .15
Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . .15
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . .15
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . .15
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . .15
<PAGE>
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . .15
9.2 DELIVERIES OF PENTEGRA . . . . . . . . . . . . . . . . . . . . . .16
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . .17
10.2 INDEMNIFICATION BY PENTEGRA. . . . . . . . . . . . . . . . . . . .17
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. . . . . . . . . . . .18
10.4 INDEMNIFICATION PROCEDURE. . . . . . . . . . . . . . . . . . . . .19
10.5 RIGHT OF SETOFF. . . . . . . . . . . . . . . . . . . . . . . . . .19
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . .20
12.2 INVESTMENTS; COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . .20
12.3 ECONOMIC RISK; SOPHISTICATION. . . . . . . . . . . . . . . . . . .21
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . .21
14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . .22
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . .22
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . .22
14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . .22
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . .22
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . .22
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . .23
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . .23
14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . .23
14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . .23
14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .23
14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . .24
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and
executed effective August 11, 1997, is by and among PENTEGRA DENTAL GROUP,
INC., a Delaware corporation ("Pentegra"), EDWARD T. DOUGHERTY, JR., D.D.S.,
P.A., a Maryland professional corporation ("Company") and EDWARD T.
DOUGHERTY, JR., D.D.S., shareholder of Company (referred to herein as
"Shareholder" or "Shareholders").
WITNESSETH:
WHEREAS, Company operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, the Boards of Directors of the Company and Pentegra have
determined that a reorganization between each of them is in the best
interests of their respective companies;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Company, the "Target Companies")
and simultaneously with the closing of the reorganization contemplated
herein, intends to consummate its initial public offering ("Initial Public
Offering") of shares of its common stock, par value $.01 per share ("Pentegra
Common Stock");
WHEREAS, it is intended for Federal income tax purposes that the
reorganization contemplated by this Agreement shall qualify as an
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE REORGANIZATION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.2 MERGER. Subject to and upon the terms and conditions contained
herein, on the Closing Date, the Company shall be merged with and into
Pentegra (or its designated affiliate, in which case, the references herein
to Pentegra shall be to such designated affiliate and its shares of common
stock) in accordance with this Agreement and the separate corporate existence
of the Company shall thereupon cease
<PAGE>
("Merger"). Pentegra shall be the surviving corporation in the Merger
("Surviving Corporation") and shall continue to be governed by the laws of
the State of Delaware and the separate corporate existence of Pentegra with
all rights, privileges, powers, immunities and purposes shall continue
unaffected by the Merger. The Merger shall have the effects specified in the
Delaware General Corporation Law and the Maryland Business Corporation Law.
If all the conditions to the Merger set forth herein shall have been
fulfilled or waived in accordance herewith and this Agreement shall not have
been terminated in accordance herewith, the parties hereto shall cause to be
properly executed and filed on the Closing Date Certificates of Merger for
the Company meeting the applicable legal requirements. The Mergers shall
become effective on the Closing Date or the filing of such documents, in
accordance with applicable law, or at such later time as the parties hereto
have agreed upon and designated in such merger filings.
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of
Incorporation and Bylaws of Pentegra shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation until duly amended in
accordance with their terms.
1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra
immediately prior to the effective date of the Merger shall be the directors
of the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal
in accordance with the Surviving Corporation's Certificate of Incorporation
and Bylaws. The persons who are officers of Pentegra immediately prior to
the effective date of the Merger shall be the officers of the Surviving
Corporation and shall hold their respective offices until their successors
have been duly elected or appointed and qualified or until their earlier
death, resignation or removal.
1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and
without any action on the part of the holder thereof, all shares of the
Company's common stock issued and outstanding on the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired and
shall cease to exist, and each holder of a certificate of representing shares
of Company common stock shall thereafter cease to have any rights with
respect to such shares except the right to receive the consideration set
forth on ANNEX I attached hereto (the "Merger Consideration"). Each share
of common stock of the Company held in treasury at the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired
without payment of any consideration therefor. On the effective date of the
Merger, each share of Pentegra Common Stock issued and outstanding shall, by
virtue of he Mergers, and without any action on the part of the holder
thereof, continue unchanged and remain outstanding as a share of validly
issued, fully paid and nonassessable share of Surviving Corporation common
stock.
1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the
Merger, the Shareholders, as the holders of a certificate or certificates
representing shares of Company common stock shall, upon surrender of such
certificate or certificates, receive the Merger Consideration, and until the
certificate or certificates of Company common stock shall have been
surrendered by the Shareholder and replaced by a certificate or certificates
representing Pentegra Common Stock (as set forth on ANNEX I), the certificate
or certificates of Company common stock shall, for all purposes be deemed to
evidence ownership of the number of shares of Pentegra Common Stock
determined in accordance with the provisions of ANNEX I. All shares of
Pentegra Common Stock issuable to the Shareholders in the Merger shall be
deemed for all purposes to have been issued by Pentegra on the Closing Date.
The Shareholders shall deliver to Pentegra at Closing the certificate or
certificates representing the Company common stock owned by them, duly
endorsed in blank by the Shareholders, or accompanied by duly executed blank
stock powers, and with all necessary transfer tax and other revenue stamps,
acquired at the Shareholder's expense, affixed and cancelled.
1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date,
Pentegra shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in Pentegra its
right, title or interest in, to or under
<PAGE>
any of the Assets or otherwise to carry out this Agreement, in return for the
consideration set forth in this Agreement, the Company and Shareholders shall
excecute and deliver all such deeds, bills of sale, assignments and
assurances and take and do all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under the Assets in Pentegra or otherwise to carry
out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional
corporation or association, as applicable, duly organized, validly existing
and in good standing under the laws of the State of Maryland. Company has
all necessary corporate powers to own all of its assets and to carry on its
business as such business is now being conducted. Company does not own stock
in or control, directly or indirectly, any other corporation, association or
business organization, nor is Company a party to any joint venture or
partnership. The Shareholders are the sole shareholders of Company and own
all outstanding shares of capital stock free of all security interests,
claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each
share of Company's common stock has been legally and validly issued and fully
paid and nonassessable. No shares of capital stock of Company are owned by
Company in treasury. There are no outstanding (a) bonds, debentures, notes or
other obligations the holders of which have the right to vote with the
stockholders of Company on any matter, (b) securities of Company convertible
into equity interests in Company, or (c) commitments, options, rights or
warrants to issue any such equity interests in Company, to issue securities
of Company convertible into such equity interests, or to redeem any
securities of Company. No shares of capital stock of Company have been
issued or disposed of in violation of the preemptive rights, rights of first
refusal or similar rights of any of Company's stockholders. Company is not
required to qualify to do business as a foreign corporation in any other
state or jurisdiction by reason of its business, properties or activities in
or relating to such other state or jurisdiction. Company does not have any
assets, employees or offices in any state other than the state set forth in
the first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate
power to execute, deliver and perform this Agreement and all agreements and
other documents executed and delivered by it pursuant to this Agreement or to
be executed and delivered on the Closing Date, and has taken all action
required by law, its Articles or Certificate of Incorporation, its Bylaws or
otherwise, to authorize the execution, delivery and performance of this
Agreement and such related documents. Each Shareholder has the legal
capacity to enter into and perform this Agreement and the other agreements to
be executed and delivered in connection herewith. Company has obtained the
approval of its stockholders necessary to the consummation of the
transactions contemplated herein. This Agreement and all agreements and
documents executed and delivered in connection herewith have been, or will be
as of the Closing Date, duly executed and delivered by Company and
Shareholders, as appropriate, and constitute or will constitute the legal,
valid and binding obligations of Company and Shareholders, enforceable
against Company and Shareholders in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of
consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, violate any provision of the Articles or
Certificate of Incorporation or Bylaws of Company or any provisions of, or
result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or
decree to which Company or any Shareholder is a party or by which Company or
any Shareholder is bound, or violate any material restrictions of any kind to
which Company is subject, or result in any lien or encumbrance on any of
Company's assets or the Assets.
<PAGE>
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to
the knowledge of Company and Shareholders, threatened, which may result in
the revocation, cancellation or suspension, or any adverse modification, of
any such licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Company or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or
dividend of any kind has been declared or paid by Company on any of its
capital stock since the Balance Sheet Date. No repurchase of any of
Company's capital stock has been approved, effected or is pending, or is
contemplated by Company.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Company and all
amendments thereto have been delivered to Pentegra. The minute books of
Company contain accurate minutes of all meetings of and consents to actions
taken without meetings of the Board of Directors and stockholders of Company
since its formation. The books of account of Company have been kept
accurately in the ordinary course of business and the revenues, expenses,
assets and liabilities of Company have been properly recorded in such books.
2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any
related unaudited statements of income, retained earnings, schedule of
accounts receivable, accounts payable and accrued liabilities, and cash flows
for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Company as of
the dates and for the periods indicated and reflect all fixed and contingent
liabilities of Company.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all
leases pursuant to which Company or any Shareholder leases, as lessor or
lessee, real or personal property used in operating the Business, related to
the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and
enforceable in accordance with their respective terms, and there is not under
any such lease any existing default by Company, as lessor or lessee, or any
condition or event of which any Shareholder or Company has knowledge which
with notice or lapse of time, or both, would constitute a default, in respect
of which Company or Shareholders have not taken adequate steps to cure such
default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Company and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances
set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to
<PAGE>
the Closing Date and evidence of such releases of liens and claims shall be
provided to Pentegra on the Closing Date and the Assets shall not be used to
satisfy such liens, claims or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Company, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on
EXHIBIT 2.12, Company has no right, title or interest in or to patents,
patent rights, corporate names, assumed names, manufacturing processes, trade
names, trademarks, service marks, inventions, specialized treatment
protocols, copyrights, formulas and trade secrets or similar items. Set
forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies
of Company, including the names of any entities from whom Company previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Company in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Company has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the name of each director and officer of Company
and the offices held by each, (b) the most recent payroll report of Company,
showing all current employees of Company and their current levels of
compensation, (c) promised increases in compensation of employees of Company
that have not yet been effected, (d) oral or written employment agreements,
consulting agreements or independent contractor agreements (and all
amendments thereto) to which Company is a party, copies of which have been
delivered to Pentegra, and (e) all employee manuals, materials, policies,
procedures and work-related rules, copies of which have been delivered to
Pentegra. Company is in compliance with all applicable laws, rules,
regulations and ordinances respecting employment and employment practices.
Company has not engaged in any unfair labor practice. There are no unfair
labor practices charges or complaints pending or threatened against Company,
and Company has never been a party to any agreement with any union, labor
organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the
Business nor any of the Assets is subject to any pending, nor does Company or
any Shareholder have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Company, any Shareholder, the Business, the Assets or the
transactions contemplated by this Agreement, and, to the knowledge of Company
and Shareholders, no basis for any such action exists, nor is there any legal
impediment of which Company or any Shareholder has knowledge to the continued
operation of its business or the use of the Assets in the ordinary course,
subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Company has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Company ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted or may be made
by any party thereto. Except as indicated on such Exhibits, there is not
under any such Contract any existing default
<PAGE>
by Company or any Shareholder, or any condition or event of which Company or
any Shareholder has knowledge which with notice or lapse of time, or both,
would constitute a default. Company and Shareholders have no knowledge of
any default by any other party to such Contracts. Company and Shareholders
have not received notice of the intention of any party to any Contract to
cancel or terminate any Contract and have no reason to believe that any
amendment or change to any Contract is contemplated by any party thereto.
Other than those contracts, obligations and commitments listed on EXHIBIT
2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material
written or oral agreement contract, lease or arrangement, including without
limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
the Company or Shareholders, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Company on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16,
Company has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
<PAGE>
(d) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Company since the Balance Sheet
Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(j) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties,
assets or business or the Business or the Assets, or experienced any other
material adverse change in its financial condition, assets, prospects,
liabilities or business;
(n) Declared or paid a distribution, payment or dividend of any
kind on the capital stock of Company;
(o) Repurchased, approved any repurchase or agreed to repurchase
any of Company's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Company has filed all tax returns (including tax
reports and other statements) required to have been filed by it, and has paid
all taxes (including any interest, penalty or additions thereto) required to
have been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Company has not received any notice that any tax deficiency or
delinquency has been or may be asserted against Company. There are no
audits relating to taxes of Company pending or in process or, to the
knowledge of Company, threatened. Company is not currently the beneficiary of
any waiver of any statute of limitations in respect of taxes nor of any
extension of time within which to file any tax return or to pay any tax
assessment or deficiency. There are no liens or encumbrances relating to
taxes on or threatened against any of the assets of Company. Company has
withheld
<PAGE>
and paid all taxes required by law to have been withheld and paid by it.
Neither Company nor any predecessor of Company is or has been a party to any
tax allocation or sharing agreement or a member of an affiliated group of
corporations filing a consolidated Federal income tax return. Company has
delivered to Pentegra correct and complete copies of Company's three most
recently filed annual state, local and Federal income tax returns, together
with all examination reports and statements of deficiencies assessed against
or agreed to by Company during the three calendar year period preceding the
date of this Agreement. Company has neither made any payments, is obligated
to make any payments, or is a party to any agreement that under any
circumstance could obligate it to make any payments that will not be
deductible under Code section 280G.
(b) No Shareholder presently intends to dispose of any of the shares of
Pentegra Common Stock to be received hereunder nor is a party to any plan,
arrangement or agreement for the disposition of such shares. Company and
Shareholders have no knowledge, after due inquiry, of any such intent, plan,
arrangement or agreement by any Shareholder. Nothing contained herein shall
prohibit Shareholders from selling such shares of Pentegra Common Stock after
the designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage
commissions or finder's or similar fees in connection with the transactions
contemplated by this Agreement which may be now or hereafter asserted against
Pentegra, Company or Company's shareholders resulting from any action taken
by Company or any Shareholder or their respective agents or employees, or any
of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Company did not have, as of the Balance Sheet
Date, and has not incurred since that date and will not have incurred as of
the Closing Date, any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
other than those incurred in the ordinary course of business or as set forth
on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable
grounds to know, of any basis for the assertion against Company or any
Shareholder as of the Balance Sheet Date, of any claim or liability of any
nature in any amount not fully reflected or reserved against on the Balance
Sheet, or of any claim or liability of any nature arising since that date
other than those incurred in the ordinary course of business or contemplated
by this Agreement. All indebtedness of Company (including without
limitation, indebtedness for borrowed money, guaranties and capital lease
obligations) is described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed
professional of Company carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the
industry. Valid and enforceable policies in such amounts are outstanding and
duly in force and will remain duly in force through the Closing Date. All
such policies are described in EXHIBIT 2.20 attached hereto and true and
correct copies have been delivered to Pentegra. Neither Shareholders nor
Company have not received notice or other communication from the issuer of
any such insurance policy cancelling or amending such policy or threatening
to do so. Neither Company, nor any Shareholder nor any licensed professional
employee of Company has any outstanding claims, settlements or premiums owed
against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Company has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.21 (individually "Company
<PAGE>
Plan," and collectively "Company Plans") have been operated and administered
in all material respects in accordance with all applicable laws, rules and
regulations, including without limitation, ERISA, the Internal Revenue Code
of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment
Act of 1967, as amended, and the related rules and regulations adopted by
those Federal agencies responsible for the administration of such laws. No
act or failure to act by Company has resulted in a "prohibited transaction"
(as defined in ERISA) with respect to the Company Plans. No "reportable
event" (as defined in ERISA) has occurred with respect to any of the Company
Plans. Company has not previously made, is not currently making, and is not
obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Company Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at least equal to the
value of plan liabilities or (ii) the value of plan liabilities in excess of
plan assets is disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Company, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and
Company's licensed professional employees, and the conduct of the Business
and use of the Assets, have complied to the best of my knowledge with all
applicable laws, rules, regulations and licensing requirements, including,
without limitation, the Federal Environmental Protection Act, the
Occupational Safety and Health Act, the Americans with Disabilities Act and
any environmental laws and medical waste laws, and there exist no violations
by Company, any Shareholder or any licensed professional employee of Company
of any Federal, state or local law or regulation. Company and Shareholders
have not received any notice of a violation of any Federal, state and local
laws, regulations and ordinances relating to the operations of the Business
and Assets and no notice of any pending inspection or violation of any such
law, regulation or ordinance has been received by Company.
2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed
professional employee or independent contractor of Company has timely filed
all claims or other reports required to be filed with respect to the purchase
of services by third-party payors, and all such claims or reports are
complete and accurate, and has no liability to any payor with respect
thereto. There are no pending appeals, overpayment determinations,
adjustments, challenges, audit, litigation or notices of intent to open
Medicare or Medicaid claim determinations or other reports required to be
filed by Company, any Shareholder and each licensed professional employee of
Company. Neither Company, nor any Shareholder, nor any licensed professional
employee of Company has been convicted of, or pled guilty or nolo contendere
to, patient abuse or negligence, or any other Medicare or Medicaid program
related offense and none has committed any offense which may serve as the
basis for suspension or exclusion from the Medicare and Medicaid programs or
any other third party payor program. With respect to payors, Company,
Shareholders and Company's licensed professional employees has not (a)
knowingly and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Company or Shareholders in this Agreement, and no Exhibit or certificate
issued or executed by, or information furnished by, officers or directors of
Company or any Shareholder and furnished or to be furnished to Pentegra
pursuant hereto, or in
<PAGE>
connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make the statements or facts contained
therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Company has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No
officer, employee, director or stockholder of Company, or their respective
spouses, children or affiliates, owns directly or indirectly, on an
individual or joint basis, any interest in, has a compensation or other
financial arrangement with, or serves as an officer or director of, any
customer or supplier or competitor of Company or any organization that has a
material contract or arrangement with Company.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Company's services which
accounted for more than 10% of revenues of Company in the preceding fiscal
year. Company has good relations with all such payors and other material
payors of Company and none of such payors has notified Company that it
intends to discontinue its relationship with Company or to deny any claims
submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Company and Shareholders as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been
<PAGE>
duly obtained and are in full force and effect, except as would not have a
material adverse effect upon Pentegra. Other than as would not have a
material adverse effect, there are no proceedings pending or, to the
knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has knowledge to the continued operation of its business or the use
of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the reorganization contemplated
hereby will be as of the Closing Date duly and validly authorized by all
necessary corporate action on the part of Pentegra. The Pentegra Common
Stock to be issued in connection with the reorganization contemplated hereby,
when issued in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Company or any
Shareholder pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, agree that between the
date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders
shall use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Company
and Shareholders agree to complete the Exhibits hereto to be provided by them
in form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the
Business and use the Assets in the ordinary course. Company and Shareholders
shall not enter into any lease, contract, indebtedness, commitment, purchase
or sale or acquire or dispose of any capital asset relating to the Business
or the Assets except in the ordinary course of business. Company and
Shareholders shall use their best efforts to preserve the Business and Assets
intact and shall not take any action that would have an adverse effect on
<PAGE>
the Business or Assets. Company and Shareholders shall use their best
efforts to preserve intact the relationships with payors, customers,
suppliers, patients and others having significant business relations with
Company. Company and Shareholders shall collect its receivables and pay its
trade payables in the ordinary course of business. Company and Shareholdes
shall not introduce any new method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra
and its authorized representatives access to, and make available for
inspection, all of the assets and business of Company, the Business and the
Assets, including employees, customers and suppliers and permit Pentegra and
its authorized representatives to inspect and make copies of all documents,
records and information with respect to the business or assets of Company,
the Business or the Assets as Pentegra or its representatives may request.
Company and Shareholders shall promptly notify Pentegra in writing of (a) any
notice or communication relating to a default or event that, with notice or
lapse of time or both, could become a default, under any contract, commitment
or obligation to which Company is a party or relating to the Business or the
Assets, and (b) any adverse change in Company's or the Business' financial
condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and
Shareholders shall use their best efforts to secure all necessary approvals
and consents of third parties to the consummation of the transactions
contemplated hereby, including consents described on EXHIBIT 2.4. Company
and Shareholders shall use their best efforts to obtain all licenses,
permits, approvals or other authorizations required under any law, rule,
regulation, or otherwise to provide the services of the Practice contemplated
by the Service Agreement and to conduct the intended business of the Practice
and operate the Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance
with the provisions hereof, Company and Shareholders shall not, and shall use
its best efforts to cause Company's employees, agents and representatives not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or
the making or implementation of any proposal or offer, including without
limitation, any proposal or offer to any Shareholder, with respect to a
merger, acquisition, consolidation or similar transaction involving, or the
purchase of all or any significant portion of the assets or any equity
securities of Company or engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person relating to such proposal or offer, and Company and Shareholders will
immediately cease any such activities, discussions or negotiations heretofore
conducted with respect to any of the foregoing. Company and Shareholders
shall immediately notify Pentegra if any such inquiries or proposals are
received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Company or any entity might have any liability whatsoever
arising from any insurance, pension plan, employment tax or similar
liability of Company to any employee or other person or entity (including,
without limitation, any Company Plan and any liability under employment
contracts with Company) allocable to services performed prior to the Closing
Date. Company and Shareholders acknowledge that the purpose and intent of
this covenant is to assure that Pentegra shall have no unfunded liability
whatsoever at any time after the Closing Date with respect to any of
Company's employees or similar persons or entities, including, without
limitation, any Company Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Company shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash
compensation of any Shareholder (other than in the ordinary course of
business) or other employee or an independent contractor of Company, adopt,
amend or terminate any compensation plan, employment agreement, independent
contractor agreement, employee policies and procedures or employee benefit
plan, take any action that could deplete the assets of any employee benefit,
or fail to pay any premium or contribution due or file any report with
respect to any employee benefit plan, or
<PAGE>
take any other actions with respect to its employees or employee matters
which might have an adverse effect upon Company, its business, assets or
prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or
dividend of any kind will be declared or paid by Company, nor will any
repurchase of any of Company's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders
shall use their best efforts to take, or cause to be taken, all actions
necessary to effect the reorganization contemplated hereby under applicable
law.
4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not
change in any material respect the tax or financial accounting methods or
practices followed by Company (including any material change in any
assumption underlying, or any method of calculating, any bad debt,
contingency or other reserve), except as may be required by law or generally
accepted accounting principles. Company and Shareholders will duly,
accurately and timely (without regard to any extensions of time) file all
returns, information statements and other documents relating to taxes of
Company required to be filed by it, and pay all taxes required to be paid by
it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Company hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Company and Shareholders covenant and agree that all of the
creditors with respect to the Business and the Assets will be paid in full by
Company prior to the Closing Date, except to extent that any liability to
such creditors is assumed by Pentegra pursuant to this Agreement. If
required by Pentegra, Company and Shareholders shall furnish Pentegra with
proof of payment of all creditors with respect to the Business and the
Assets. Notwithstanding the foregoing, Company and Shareholders may dispute
the validity or amount of any such creditor's claim without being deemed to
be in violation of this SECTION 4.11, provided that such dispute is in good
faith and does not unreasonably delay the resolution of the claim and
provided, further that Company and Shareholders agree to indemnify and bond
Pentegra for such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Company leases any of its premises from any Shareholder
or other affiliate of Company or any shareholder of Company, Pentegra shall
have entered into a building lease (the "Building Lease") with the owner of
such premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, (i) a five year
initial term plus three five-year renewal options, (ii) a lease rate equal to
the fair market value lease rate, as agreed to by Pentegra, and (iii) such
other provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with
all requests made by Pentegra for the purpose of allowing Pentegra to hire
those non-dentist employees of Company designated by Pentegra, such
employment to be effective as of the Closing Date. Notwithstanding the
above, Company and Shareholders shall remain liable under any Company Plans
for any claims incurred by any employees or their spouses or dependents, and
for all compensation, bonuses, benefits and other such items and other
liabilities related to Company's employees incurred by Company prior to the
Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all
employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall
be treated as "leased employees" (as defined in Code Section 414(n)) of
Company and shall be treated as Clinic employees for purposes of eligibility
and participation in Company Plans.
4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective
as of the Closing Date.
<PAGE>
4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a
limited liability company, partnership or other legal entity (the "Practice")
approved by Pentegra for the purpose of practicing dentistry and entering
into the Service Agreement. The Practice shall be duly organized, in
existing and in good standing under the laws of the State in which the
practice of dentistry is conducted by the Shareholders and the Practice. The
Practice shall have all necessary power to own all of its assets and to carry
on its business as such business is now being conducted. The Shareholders
shall be the sole member/shareholder/partner of the Practice and own all such
interests free of all security interests, claims, encumbrances and liens.
Each interest in the Practice shall be legally and validly issued and fully
paid and nonassessable. There shall be no outstanding (a) bonds, debentures,
notes or other obligations the holders of which have the right to vote with
the members/partners/shareholders of the Practice on any matter, (b)
securities of the Practice convertible into equity interests in the Practice,
or (c) commitments, options, rights or warrants to issue any such equity
interests in the Practice, to issue securities of the Practice convertible
into such equity interests, or to redeem any securities of the Practice. No
interests of the Practice shall have been issued or disposed of in violation
of the preemptive rights, rights of first refusal or similar rights of any of
the Practice's members/partners/shareholders. The Practice shall quality to
do business as a foreign entity in any other state or jurisdiction by reason
of its business, properties or activities in or relating to such other state
or jurisdiction. The Company shall have transferred the Excluded Assets set
forth on EXHIBIT 4.16 to the Practice or the Dentist and shall have caused
the Practice to assume the Excluded Liabilities set forth on EXHIBIT 4.16 in
exchange for equity interest in the Practice, and the Company shall have
distributed such equity interests in the Practice to the Shareholders.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation,
Bylaws/Regulations and minutes of the Practice and all amendments thereto of
the Practice shall have been delivered to Pentegra and shall be in form and
substance satisfactory to Pentegra. The minute books of the Practice shall
contain all accurate minutes of the meetings of and consents to actions taken
without meetings of the members\managers/partners/board of directors of the
Practice since its formation. The books of account of the Practice shall
have been kept accurately in the ordinary course of business and the
revenues, expenses, assets and liabilities of the Practice shall have been
properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements
and other documents to be executed and delivered by it pursuant to this
Agreement, including without limitation, the Service Agreement and each
Employment Agreement or to be executed and delivered on the Closing Date, and
has taken all action required by law, its Organization/Partnership
Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to
authorize the execution, delivery and performance of such documents. The
Service Agreement, the Employment Agreement and the other agreements
contemplated hereby shall have been duly executed and delivered by the
Practice and constitute or will constitute the legal, valid and binding
obligations of the Practice enforceable against the Practice in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of the
Service Agreement, the Employment Agreements and the other agreements
contemplated hereby will not violate any provision of the organizational
documents of the Practice or any provisions of, or result in the acceleration
of, any obligation under any mortgage, lien, lease, agreement, rent,
instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any
material restrictions of any kind to which the Practice is subject, or result
in any lien or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
<PAGE>
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and have filed with
the proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra
shall use its best efforts to secure all necessary approvals and consents of
third parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS.
Pentegra, Shareholders and Company agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall
cooperate to promptly prepare and file with the Securities Exchange
Commission ("SEC") the Registration Statement on Form S-1 (or other
appropriate Form) to be filed by Pentegra in connection with its Initial
Public Offering (including the prospectus constituting a part thereof, the
"Registration Statement"). Pentegra shall obtain all necessary state
securities laws or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement and the Company and Shareholders
shall furnish all information concerning Company and Shareholders as may be
reasonable requested in connection with any such action.
Company and Shareholder represent and warrant that none of the
information or documents supplied or to be supplied by it specifically for
inclusion in the Registration Statement, by exhibit or otherwise, will, at
the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act of 1933, 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, in
light of the circumstances under which they were made, not misleading.
Company and Shareholders shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.
Company and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by
Pentegra in connection with the preparation of the Registration Statement and
each amendment or supplement thereto, or any other statement, filing, notice
or application made by or on behalf of each such party or any of its
subsidiaries to any governmental entity in connection with the transactions
contemplated by the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
<PAGE>
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Company and Shareholders contained herein shall have been true and correct
in all respects when initially made and shall be true and correct in all
respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Company and Shareholders prior
to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Company shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Company, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service
Agreement"), in substantially the form attached hereto as EXHIBIT 7.7,
pursuant to which Pentegra will provide management services to the Practice.
Each Shareholder shall have executed and delivered a Guaranty Agreement in
substantially the form attached as EXHIBIT 4.10 of the Service Agreement
pursuant to which Shareholder shall, among other things, guaranty the
obligations of the Practice under the Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused
each shareholder of Company that has an existing employment agreement with
Company to have terminated his or her employment agreement with Company and
shall have executed an employment agreement ("Employment Agreement") with the
Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise
satisfactory to Company and Pentegra.
7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have
obtained all necessary government and other third-party approvals and
consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables
or payables between Company and its shareholders or affiliates and Company
shall not have any liabilities, including indebtedness, guaranties and
capital leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Company and Shareholders shall have named Pentegra as
an additional insured on their liability insurance program in accordance with
SECTION 4.15.
<PAGE>
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Company since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Company and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pentegra contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Company shall have received all documents,
duly executed in form satisfactory to Company and its counsel, referred to in
SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days
after requested by Pentegra, Company and Shareholders shall deliver to
Pentegra the following, all of which shall be in a form satisfactory to
counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel
for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or
letter agreement in form and substance mutually acceptable to the parties
hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to
<PAGE>
therein;
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of Company
authorizing the execution, delivery and performance of this Agreement, the
Service Agreement, the Employment Agreements and all related documents and
agreements each certified by the Secretary as being true and correct copies
of the original thereof;
(d) executed merger certificate and/or plan as required by
applicable state law;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra and the original stock certificates
together with blank stock powers representing the outstanding shares of
Company common stock;
(f) certificates of the Shareholders and a duly authorized officer
of Company dated as of the Closing Date, (i) as to the truth and correctness
of the representations and warranties of Company and Shareholder contained
herein; (ii) as to the performance of and compliance by Company and
Shareholder with all covenants contained herein; and (iii) certifying that
all conditions precedent of Company and Shareholders to the Closing have been
satisfied;
(g) a certificate of the Secretary of Company certifying as to the
incumbency of the directors and officers of Company and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Company;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Company and any state of required
foreign qualification of Company establishing that Company is in existence
and is in good standing to transact business in its state of incorporation;
(i) an opinion of counsel to Company and Shareholder opining as to
the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Company, the enforceability of this Agreement and the other agreements and
documents to be executed in connection herewith, and other matters reasonably
requested by Pentegra;
(j) non-foreign affidavits executed by Company;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Company and Shareholders, the following, all of which shall
be in a form satisfactory to counsel to Company and Shareholders and shall be
held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending
Closing, pursuant to an escrow agreement or letter agreement in form and
substance mutually acceptable to the parties hereto:
<PAGE>
(a) the Merger Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Company;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Company;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Company to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit attached hereto, any agreement executed pursuant hereto, and
any certificate executed and delivered by any party pursuant to the terms of
this Agreement, shall constitute representations and warranties of Company
and Shareholders, jointly and severally, or of Pentegra, as the case may be.
All such representations and warranties, and all representations and
warranties expressly labeled as such in this Agreement shall survive the date
of this Agreement and the Closing Date for a period of five (5) years
following the Closing Date, except that (i) the representations and
warranties with respect to environmental and medical waste laws and health
care laws and matters shall survive for a period of fifteen (15) years and
tax representations shall survive until one year after the expiration of the
applicable statute of limitations. Each party covenants with the other
parties not to make any claim with respect to such representations and
warranties, against any party after the date on which such survival period
shall terminate. No party shall be entitled to claim indemnity from any
other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has
timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the
case may be. Each party hereby releases, acquits and discharges the other
party from any and all claims and demands, actions and causes of action,
damages, costs,
<PAGE>
expenses and rights of setoff with respect to which the notices required by
SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS
SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"),
SHALL INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES
(EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF
THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN
"INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES,
LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING,
BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH
APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY,
AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE
FURNISHED BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND,
PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS
SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"),
JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES,
OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE
EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND
AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS,
COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE
FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON
OF OR RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY,
<PAGE>
AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO
BE FURNISHED BY INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT
AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES,
AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON
OR AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL
LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION
ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS
RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER
THE CLOSING DATE,
(E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY
RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A
RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH
THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS
SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS
SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE
REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO
MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
<PAGE>
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after
Indemnified Person receives written notice of the commencement of any action
or other proceeding in respect of which indemnification or reimbursement may
be sought hereunder, or within such lesser time as may be provided by law for
the defense of such action or proceeding, such Indemnified Person shall
notify Indemnitor thereof. If any such action or other proceeding shall be
brought against any Indemnified Person, Indemnitor shall, upon written notice
given within a reasonable time following receipt by Indemnitor of such notice
from Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Company or any Shareholder giving
rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra
shall be entitled to offset the amount of damages incurred by it as a result
of such breach of warranty, representation, covenant or agreement against any
amounts payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of
Company or any Shareholder contained in this Agreement or in any certificate
or other document executed and delivered by Company or any Shareholder
pursuant to this Agreement is or becomes untrue or breached in any material
respect or if Company or any Shareholder fails to comply in any material
respect with any covenant or agreement contained herein, and any such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;
(c) at any time by Company or any Shareholder if any representation or
warranty of Pentegra contained in this Agreement or in any certificate or
other document executed and delivered by Pentegra pursuant to this Agreement
is or becomes untrue or breached in any material respect or if Pentegra fails
to comply in any material respect with any covenant or agreement contained
herein and such misrepresentation, noncompliance or breach is not cured,
waived or eliminated within twenty (20) days after receipt of written notice
thereof;
(d) by Pentegra, Shareholders or Company if the transaction
contemplated hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the
<PAGE>
result of its legal, financial and operational due diligence with respect to
Company, that such termination is desirable and in the best interests of
Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares
of Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer
shall be treated as effective for any purpose or (b) engage in any
transaction, whether or not with respect to any shares of Pentegra Common
Stock or any interest therein, the intent or effect of which is to reduce the
risk of owning shares of Pentegra Common Stock. The certificates evidencing
the Pentegra Common Stock delivered to Company pursuant to the terms hereof
will bear a legend substantially in the form set forth below and containing
such other information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that
the shares of Pentegra Common Stock to be delivered to Company pursuant to
this Agreement have not been and will not be registered under the Securities
Act of 1933 and may not be resold without compliance with the Securities Act
of 1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to
this Agreement is being acquired solely for its own account, for investment
purposes only and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution. Each
Shareholder covenants, warrants and represents that none of the shares of
Pentegra Common Stock issued to it will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the Securities Act, as
amended, and the rules and regulations of the Securities Exchange Commission
and applicable state securities laws and regulations. All certificates
evidencing shares of Pentegra Common Stock shall bear the following legend in
addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock
shall bear any legend required by the securities or blue sky laws of any
state where Company resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the
economic risk of an investment in Pentegra Common Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and
have such knowledge and experience in financial and business matters that
they are capable of evaluating the merits and risks of the proposed
investment and therefore have the capacity to protect their own interests in
connection with the acquisition of the Pentegra Common Stock. Shareholders
and their representatives have had an adequate opportunity to ask questions
and receive answers from the
<PAGE>
officers of Pentegra concerning any and all matters relating to the
background and experience of the officers and directors of Pentegra, the
plans for the operations of the business of Pentegra, and any plans for
additional acquisitions and the like. Shareholders and their representatives
have asked any and all questions in the nature described in the preceding
sentence and all questions have been answered to their satisfaction.
Shareholders are "accredited investors" as defined in Regulation D of the
Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Company and Shareholders agree that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally
through no fault of Company or Shareholders, (ii) disclosure is required by
law or the order of any governmental authority under color of law, provided,
that prior to disclosing any information pursuant to this clause (ii),
Company and Shareholders shall, if possible, give prior written notice
thereof to the other parties hereto, and provide such other parties hereto
with the opportunity to contest such disclosure, (iii) Company and
Shareholders reasonably believe that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party, or
(iv) Company and Shareholders are the sole and exclusive owner of such
confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Company or Shareholders of the provisions of this SECTION 13, Pentegra shall
be entitled to an injunction restraining Company and Shareholders from
disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Pentegra from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. The obligations of the parties under this SECTION 13 shall
survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions
contemplated by this Agreement will qualify as a reorganization within the
meaning of Section 368(a) of the Code. The tax returns (and schedules
thereto) of Shareholders, Company and Pentegra shall be filed in a manner
consistent with such intention and Shareholders and Pentegra shall each
provide the other with such tax information, reports, returns or schedules as
may be reasonably required to assist the other in so reporting the
transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
<PAGE>
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Company and Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any
further acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Company or any Shareholder for services
rendered in connection with negotiating and closing the transactions
contemplated by this Agreement or the documents to be executed in connection
herewith, whether or not such costs or expenses are incurred before or after
the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Company.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
<PAGE>
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one and the
same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and
shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Company, be relieved from its obligations
to Company under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand,
or Company, on the other hand, file suit in any court against any other party
to enforce the terms of this Agreement against the other party or to obtain
performance by it hereunder, the prevailing party will be entitled to recover
all reasonable costs, including reasonable attorneys' fees, from the other
party as part of any judgment in such suit. The term "prevailing party" shall
mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a pro
rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Company and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Company or may demand from Company, and Company agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the Companys
or Shareholders (hereinafter referred to as a "Party"), whether made before
or after the institution of any legal proceeding, any dispute among the
parties hereto in any way arising out of, related to, or in connection with
this Agreement (hereinafter a "Dispute"), shall be resolved by binding
arbitration in accordance with the terms of this Section (hereinafter the
"Arbitration Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American
<PAGE>
Arbitration Association (the "AAA") in accordance with the terms of this
Arbitration Program, the Commercial Arbitration Rules of the AAA. In the
event of any inconsistency between this Arbitration Program and those rules
or statutes, then the terms of this Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or foreclosing upon any
personal property in which there has been granted a security interest or lien
by a Party in the Documents. In Disputes involving indebtedness or other
monetary obligations, each Party agrees that the other Party may proceed
against all liable persons, jointly and severally against one or more of
them, without impairing rights against other liable persons. Nor shall a
Party be required to join the principal obligor or any other liable persons
(e.g., sureties or guarantors) in any proceeding against a particular person.
A Party may release or settle with one or more liable persons as the Party
deems fit without releasing or impairing rights to proceed against any
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoeniz,
Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the
<PAGE>
ordinary course of business of the Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be found to
be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
EDWARD T. DOUGHERTY, JR., D.D.S., P.A.
By: /s/ Edward T. Dougherty, Jr.
-----------------------------------------
Edward T. Dougherty, Jr., President
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
-----------------------------------------
Its: Senior Vice President
----------------------------------------
/s/ Edward T. Dougherty, Jr.
---------------------------------------------
Edward T. Dougherty, Jr., D.D.S.
<PAGE>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
Annex I Merger Consideration
A Target Companies
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
4.16 Excluded Assets and Excluded Liabilities
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
FAMILY DENTAL CENTERS, P.A.
and
STEVE ANDERSON, D.D.S.
and
LINDI B. ANDERSON
<PAGE>
TABLE OF CONTENTS
PAGE
----
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . 3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . 8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . .10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . .10
<PAGE>
Section 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . .10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . .10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . .10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . .10
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . .11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . .11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . .11
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . .11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . .11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . .11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . .12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . .12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . .12
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . .12
Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . .12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . .13
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . .13
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . .13
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . .13
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . .13
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . .13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . .13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . .13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . .13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . .13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . .13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . .14
Section 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . .14
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . .14
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . .14
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . .14
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . . . . .14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . .15
<PAGE>
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . .16
10.2 INDEMNIFICATION BY PENTEGRA. . . . . . . . . . . . . . . . . . . . .16
10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . .17
10.4 INDEMNIFICATION PROCEDURE. . . . . . . . . . . . . . . . . . . . . .18
10.5 RIGHT OF SETOFF. . . . . . . . . . . . . . . . . . . . . . . . . . .18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . .19
12.2 INVESTMENTS; COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . .19
12.3 ECONOMIC RISK; SOPHISTICATION. . . . . . . . . . . . . . . . . . . .20
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . .21
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . .21
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . .21
14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . .21
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . .21
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . .21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . .22
14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . .22
14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . .22
14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed
as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra"), FAMILY DENTAL CENTERS, P.A., a New Mexico
professional association ("Contributor") and STEVE ANDERSON, D.D.S. AND LINDI
B. ANDERSON,, shareholder of Contributor (referred to herein as
"Shareholder" or "Shareholders").
WITNESSETH:
WHEREAS, Contributor operates a dental practice ("Business") and Pentegra
is engaged in the business of managing certain non-dentistry aspects of
dental practices;
WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra
desires to receive from Contributor, certain assets of Contributor;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Contributor, the "Target
Companies");
WHEREAS, it is intended for Federal income tax purposes that the
transfers contemplated by this Agreement, the Other Agreements and Pentegra's
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an
exchange within the meaning of Section 351 of the Internal Revenue Code of
1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and
conditions contained herein, on the Closing Date, Contributor shall convey,
transfer, deliver and assign to Pentegra or any affiliate of Pentegra
designated by Pentegra all of Contributor's right, title and interest in and
to those certain assets described on EXHIBIT 1.1 attached hereto
(individually, "Asset", and collectively "Assets"), free and clear of all
obligations, security interests, claims, liens and encumbrances, except as
specifically assumed, or taken subject to, by
<PAGE>
Pentegra pursuant to SECTION 1.3(b) hereof.
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and contributed hereunder, and Contributor shall retain all of
its right, title and interest in and to, the assets not specifically
transferred hereunder, including without limitation, the assets described on
EXHIBIT 1.2 (the "Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Contributor
contained herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Contributor the consideration
specified in ANNEX I attached hereto (the "Acquisition Consideration"); and,
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Contributor listed on EXHIBIT
1.3(b) attached hereto to the extent that such obligations, commitments,
liabilities and indebtedness are current and not otherwise in default. (the
"Assumed Liabilities"). Notwithstanding any contrary provision contained
herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra
assume: (i) any liability, commitment or obligation or trade payable or
indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability
set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of
or default under such contracts, leases, commitments or obligations which
occurred on or before the Closing Date; (iii) any liability for any employee
benefits payable to employees of Contributor, including, but not limited to,
liabilities arising under any Contributor Plan (as defined in SECTION 2.21
hereof); (iv) any liability based upon or arising out of a violation of any
antitrust or similar restraint-of-trade laws by any Shareholder or
Contributor, including, without limiting the generality of the foregoing, any
such antitrust liability which may arise in connection with agreements,
contracts, commitments or orders for the sale of goods or provision of
services by Contributor reflected on the books of Contributor at or prior to
the Closing Date; (v) any liability based upon or arising out of any tortious
or wrongful actions of Contributor, any licensed professional employee or
independent contractor of Contributor or any Shareholder, (vi) any liability
for the payment of any taxes of Contributor or any Shareholder, including
without limitation, sales, use and other transfer taxes and income taxes
arising from or by reason of the transactions contemplated by this Agreement;
(vii) any indebtedness secured by deeds of trust or mortgages on real
property; nor (viii) any liability incurred or to be incurred pursuant to any
malpractice or other suits or actions pending against Contributor or any
Shareholder.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement,
Contributor and Shareholders shall execute and deliver all such deeds, bills
of sale, assignments and assurances and take and do all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any
and all right, title and interest in, to and under the Assets in Pentegra or
otherwise to carry out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS.
Contributor and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Contributor is a professional
corporation or
<PAGE>
association, as applicable, duly organized, validly existing and in good
standing under the laws of the State of New Mexico. Contributor has all
necessary corporate powers to own all of its assets and to carry on its
business as such business is now being conducted. Contributor does not own
stock in or control, directly or indirectly, any other corporation,
association or business organization, nor is Contributor a party to any joint
venture or partnership. The Shareholders are the sole shareholders of
Contributor and own all outstanding shares of capital stock free of all
security interests, claims, encumbrances and liens in the amounts set forth
on EXHIBIT 2.1. Each share of Contributor's common stock has been legally
and validly issued and fully paid and nonassessable. No shares of capital
stock of Contributor are owned by Contributor in treasury. There are no
outstanding (a) bonds, debentures, notes or other obligations the holders of
which have the right to vote with the stockholders of Contributor on any
matter, (b) securities of Contributor convertible into equity interests in
Contributor, or (c) commitments, options, rights or warrants to issue any
such equity interests in Contributor, to issue securities of Contributor
convertible into such equity interests, or to redeem any securities of
Contributor. No shares of capital stock of Contributor have been issued or
disposed of in violation of the preemptive rights, rights of first refusal or
similar rights of any of Contributor's stockholders. Contributor is not
required to qualify to do business as a foreign corporation in any other
state or jurisdiction by reason of its business, properties or activities in
or relating to such other state or jurisdiction. Contributor does not have
any assets, employees or offices in any state other than the state set forth
in the first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the corporate
power to execute, deliver and perform this Agreement and all agreements and
other documents executed and delivered by it pursuant to this Agreement or to
be executed and delivered on the Closing Date, and has taken all action
required by law, its Articles or Certificate of Incorporation, its Bylaws or
otherwise, to authorize the execution, delivery and performance of this
Agreement and such related documents. Each Shareholder has the legal
capacity to enter into and perform this Agreement and the other agreements to
be executed and delivered in connection herewith. Contributor has obtained
the approval of its stockholders necessary to the consummation of the
transactions contemplated herein. This Agreement and all agreements and
documents executed and delivered in connection herewith have been, or will be
as of the Closing Date, duly executed and delivered by Contributor and
Shareholders, as appropriate, and constitute or will constitute the legal,
valid and binding obligations of Contributor and Shareholders, enforceable
against Contributor and Shareholders in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally or the availability of
equitable remedies. The execution and delivery of this Agreement, and the
agreements executed and delivered pursuant to this Agreement or to be
executed and delivered on the Closing Date, do not, and, subject to the
receipt of consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, violate any provision of the Articles or
Certificate of Incorporation or Bylaws of Contributor or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or
decree to which Contributor or any Shareholder is a party or by which
Contributor or any Shareholder is bound, or violate any material restrictions
of any kind to which Contributor is subject, or result in any lien or
encumbrance on any of Contributor's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to
the knowledge of Contributor and Shareholders, threatened, which may result
in the revocation, cancellation or suspension, or any adverse modification,
of any such licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of
<PAGE>
this Agreement and the agreements and documents contemplated hereby on the
part of Contributor or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been declared or paid by Contributor on any of its capital
stock since the Balance Sheet Date. No repurchase of any of Contributor's
capital stock has been approved, effected or is pending, or is contemplated
by Contributor.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Contributor and all
amendments thereto have been delivered to Pentegra. The minute books of
Contributor contain accurate minutes of all meetings of and consents to
actions taken without meetings of the Board of Directors and stockholders of
Contributor since its formation. The books of account of Contributor have
been kept accurately in the ordinary course of business and the revenues,
expenses, assets and liabilities of Contributor have been properly recorded
in such books.
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore
furnished Pentegra with copies of its unaudited balance sheet and related
unaudited statements of income, retained earnings and cash flows for its
prior two full fiscal years, as well as copies of its unaudited balance sheet
as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet"
and the latest date thereof shall be referred to as the "Balance Sheet Date")
and any related unaudited statements of income, retained earnings, schedule
of accounts receivable, accounts payable and accrued liabilities, and cash
flows for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Contributor as
of the dates and for the periods indicated and reflect all fixed and
contingent liabilities of Contributor.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Contributor or any Shareholder leases, as lessor or lessee,
real or personal property used in operating the Business, related to the
Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and
enforceable in accordance with their respective terms, and there is not under
any such lease any existing default by Contributor, as lessor or lessee, or
any condition or event of which any Shareholder or Contributor has knowledge
which with notice or lapse of time, or both, would constitute a default, in
respect of which Contributor or Shareholders have not taken adequate steps to
cure such default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Contributor and Shareholders have
no knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good, valid
and marketable title to all of the Assets, free and clear of any liens,
claims, charges, exceptions or encumbrances, except for those, if any, which
are set forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all
encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances
indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the
Closing Date and evidence of such releases of liens and claims shall be
provided to Pentegra on the Closing Date and the Assets shall not be used to
satisfy such liens, claims or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Contributor, are in good, current, standard and merchantable
condition and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Contributor has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights,
<PAGE>
formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a
listing of all names of all predecessor companies of Contributor, including
the names of any entities from whom Contributor previously acquired
significant assets. Except for off-the-shelf software licenses and except as
set forth on EXHIBIT 2.12, Contributor is not a licensee in respect of any
patents, trademarks, service marks, trade names, copyrights or applications
therefor, or manufacturing processes, formulas or trade secrets or similar
items and no such licenses are necessary for the conduct of the Business or
the use of the Assets. No claim is pending or has been made to the effect
that the Assets or the present or past operations of Contributor in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Contributor has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the name of each director and officer of
Contributor and the offices held by each, (b) the most recent payroll report
of Contributor, showing all current employees of Contributor and their
current levels of compensation, (c) promised increases in compensation of
employees of Contributor that have not yet been effected, (d) oral or written
employment agreements, consulting agreements or independent contractor
agreements (and all amendments thereto) to which Contributor is a party,
copies of which have been delivered to Pentegra, and (e) all employee
manuals, materials, policies, procedures and work-related rules, copies of
which have been delivered to Pentegra. Contributor is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Contributor has not engaged in any unfair labor
practice. There are no unfair labor practices charges or complaints pending
or threatened against Contributor, and Contributor has never been a party to
any agreement with any union, labor organization or collective bargaining
unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Contributor nor the
Business nor any of the Assets is subject to any pending, nor does
Contributor or any Shareholder have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Contributor, any Shareholder, the Business, the
Assets or the transactions contemplated by this Agreement, and, to the
knowledge of Contributor and Shareholders, no basis for any such action
exists, nor is there any legal impediment of which Contributor or any
Shareholder has knowledge to the continued operation of its business or the
use of the Assets in the ordinary course, subject to consents set forth on
EXHIBIT 2.4.
2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Contributor ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted or may be made
by any party thereto. Except as indicated on such Exhibits, there is not
under any such Contract any existing default by Contributor or any
Shareholder, or any condition or event of which Contributor or any
Shareholder has knowledge which with notice or lapse of time, or both, would
constitute a default. Contributor and Shareholders have no knowledge of any
default by any other party to such Contracts. Contributor and Shareholders
have not received notice of the intention of any party to any Contract to
cancel or terminate any Contract and have no reason to believe that any
amendment or change to any Contract is contemplated by any party thereto.
Other than those contracts, obligations and commitments listed on EXHIBIT
2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Contributor are not a party to any
material written or oral agreement contract, lease or arrangement, including
without limitation, any:
<PAGE>
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
the Contributor or Shareholders, oral or written, that provide for
prepayments or deferred installment payments; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Contributor on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16,
Contributor has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(d) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Contributor since the
<PAGE>
Balance Sheet Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(j) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties,
assets or business or the Business or the Assets, or experienced any other
material adverse change in its financial condition, assets, prospects,
liabilities or business;
(n) Declared or paid a distribution, payment or dividend of any
kind on the capital stock of Contributor;
(o) Repurchased, approved any repurchase or agreed to repurchase
any of Contributor's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. Contributor has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Contributor has not received any notice that any tax deficiency or
delinquency has been or may be asserted against Contributor. There are no
audits relating to taxes of Contributor pending or in process or, to the
knowledge of Contributor, threatened. Contributor is not currently the
beneficiary of any waiver of any statute of limitations in respect of taxes
nor of any extension of time within which to file any tax return or to pay
any tax assessment or deficiency. There are no liens or encumbrances
relating to taxes on or threatened against any of the assets of Contributor.
Contributor has withheld and paid all taxes required by law to have been
withheld and paid by it. Neither Contributor nor any predecessor of
Contributor is or has been a party to any tax allocation or sharing agreement
or a member of an affiliated group of corporations filing a consolidated
Federal income tax return. Contributor has delivered to Pentegra correct
and complete copies of Contributor's three most recently filed annual state,
local and Federal income tax returns, together with all examination reports
and statements of deficiencies assessed against or agreed to by Contributor
during the three calendar year period preceding the date of this Agreement.
Contributor has neither made any payments, is obligated to make any payments,
or is a party to any agreement that under any circumstance could obligate it
to make any payments that will not be deductible under Code
<PAGE>
section 280G.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated
by this Agreement which may be now or hereafter asserted against Pentegra,
Contributor or Contributor's shareholders resulting from any action taken by
Contributor or any Shareholder or their respective agents or employees, or
any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Contributor did not have, as of the Balance
Sheet Date, and has not incurred since that date and will not have incurred
as of the Closing Date, any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
other than those incurred in the ordinary course of business or as set forth
on EXHIBIT 2.16. Contributor and Shareholders do not know, or have
reasonable grounds to know, of any basis for the assertion against
Contributor or any Shareholder as of the Balance Sheet Date, of any claim or
liability of any nature in any amount not fully reflected or reserved against
on the Balance Sheet, or of any claim or liability of any nature arising
since that date other than those incurred in the ordinary course of business
or contemplated by this Agreement. All indebtedness of Contributor
(including without limitation, indebtedness for borrowed money, guaranties
and capital lease obligations) is described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Contributor, each Shareholder and each licensed
professional of Contributor carries property, liability, malpractice,
workers' compensation and such other types of insurance as is customary in
the industry. Valid and enforceable policies in such amounts are outstanding
and duly in force and will remain duly in force through the Closing Date.
All such policies are described in EXHIBIT 2.20 attached hereto and true and
correct copies have been delivered to Pentegra. Neither Shareholders nor
Contributor have not received notice or other communication from the issuer
of any such insurance policy cancelling or amending such policy or
threatening to do so. Neither Contributor, nor any Shareholder nor any
licensed professional employee of Contributor has any outstanding claims,
settlements or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Contributor has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Contributor
Plan," and collectively "Contributor Plans") have been operated and
administered in all material respects in accordance with all applicable laws,
rules and regulations, including without limitation, ERISA, the Internal
Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964,
as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in
Employment Act of 1967, as amended, and the related rules and regulations
adopted by those Federal agencies responsible for the administration of such
laws. No act or failure to act by Contributor has resulted in a "prohibited
transaction" (as defined in ERISA) with respect to the Contributor Plans. No
"reportable event" (as defined in ERISA) has occurred with respect to any of
the Contributor Plans. Contributor has not previously made, is not currently
making, and is not obligated in any way to make, any contributions to any
multiemployer plan within the meaning of the Multi-Employer Pension Plan
Amendments Act of 1980. With respect to each Contributor Plan, either (i)
the value of plan assets (including commitments under insurance contracts) is
at least equal to the value of plan liabilities or (ii) the value of plan
liabilities in excess of plan assets is disclosed on the Balance Sheet, all
as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order,
<PAGE>
writ, injunction, decree, rule or regulation that materially and adversely
affects the condition (financial or otherwise), operations, assets,
liabilities, business or prospects of Contributor, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Shareholders and
Contributor's licensed professional employees, and the conduct of the
Business and use of the Assets, have complied with all applicable laws,
rules, regulations and licensing requirements, including, without limitation,
the Federal Environmental Protection Act, the Occupational Safety and Health
Act, the Americans with Disabilities Act and any environmental laws and
medical waste laws, and there exist no violations by Contributor, any
Shareholder or any licensed professional employee of Contributor of any
Federal, state or local law or regulation. Contributor and Shareholders have
not received any notice of a violation of any Federal, state and local laws,
regulations and ordinances relating to the operations of the Business and
Assets and no notice of any pending inspection or violation of any such law,
regulation or ordinance has been received by Contributor.
2.24 THIRD PARTY PAYORS. Contributor, Shareholders and each licensed
professional employee or independent contractor of Contributor has timely
filed all claims or other reports required to be filed with respect to the
purchase of services by third-party payors, and all such claims or reports
are complete and accurate, and has no liability to any payor with respect
thereto. There are no pending appeals, overpayment determinations,
adjustments, challenges, audit, litigation or notices of intent to open
Medicare or Medicaid claim determinations or other reports required to be
filed by Contributor, any Shareholder and each licensed professional employee
of Contributor. Neither Contributor, nor any Shareholder, nor any licensed
professional employee of Contributor has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Contributor, Shareholders and Contributor's licensed professional employees
has not (a) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made
any false statement or representation of a material fact for use in
determining rights to any benefit or payment; (c) failed to disclose
knowledge of the occurrence of any event affecting the initial or continued
right to any benefit or payment on its own behalf or on behalf of another,
with the intent to fraudulently secure such benefit or payment; and (d)
violated any applicable state anti-remuneration or self-referral statutes,
rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Contributor or Shareholders in this Agreement, and no Exhibit or certificate
issued or executed by, or information furnished by, officers or directors of
Contributor or any Shareholder and furnished or to be furnished to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Contributor has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Contributor, or their respective
spouses, children or affiliates, owns directly or indirectly, on an
individual or joint basis, any interest in, has a compensation or other
financial arrangement with, or serves as an officer or director of, any
customer or supplier or competitor of Contributor or any organization that
has a material contract or arrangement with Contributor.
<PAGE>
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Contributor's services which
accounted for more than 10% of revenues of Contributor in the preceding
fiscal year. Contributor has good relations with all such payors and other
material payors of Contributor and none of such payors has notified
Contributor that it intends to discontinue its relationship with Contributor
or to deny any claims submitted to such payor for payment.
2.29 NO INTENTION TO DISPOSE OF SHARES. Contributor does not intend to
dispose of any of the shares of Pentegra Common Stock to be received
hereunder and is not a party to any plan, arrangement or agreement for the
disposition of such shares. Contributor and Shareholders have no knowledge,
after due inquiry, of any such intent, plan, arrangement or agreement by any
Shareholder. Nothing contained herein shall prohibit Contributor from
selling such shares of Pentegra Common Stock after the designated holding
period and in accordance with SECTION 12.1 hereof.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Contributor and Shareholders
as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware, and is or shall be as of the Closing, duly qualified to do business
in New Mexico.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would
not have a material adverse effect, there are no proceedings pending or, to
the knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra
<PAGE>
nor its business or assets is subject to any pending, nor does Pentegra have
knowledge of any threatened, litigation, governmental investigation,
condemnation or other proceeding against or relating to or affecting
Pentegra, its business, assets or the transactions contemplated by this
Agreement, and, to the knowledge of Pentegra, no basis for any such action
exists, nor is there any legal impediment of which Pentegra has knowledge to
the continued operation of its business or the use of its Assets in the
ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Contributor or
any Shareholder pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
SECTION 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS.
Contributor and Shareholders, jointly and severally, agree that between
the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Shareholders
shall use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions.
Contributor and Shareholders agree to complete the Exhibits hereto to be
provided by them in form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Contributor and Shareholders shall operate the
Business and use the Assets in the ordinary course. Contributor and
Shareholders shall not enter into any lease, contract, indebtedness,
commitment, purchase or sale or acquire or dispose of any capital asset
relating to the Business or the Assets except in the ordinary course of
business. Contributor and Shareholders shall use their best efforts to
preserve the Business and Assets intact and shall not take any action that
would have an adverse effect on the Business or Assets. Contributor and
Shareholders shall use their best efforts to preserve intact the
relationships with payors, customers, suppliers, patients and others having
significant business relations with Contributor. Contributor and Shareholders
shall collect its receivables and pay its trade payables in the ordinary
course of business. Contributor and Shareholdes shall not introduce any new
method of management, operations or accounting.
<PAGE>
4.3 ACCESS AND NOTICE. Contributor and Shareholders shall permit
Pentegra and its authorized representatives access to, and make available for
inspection, all of the assets and business of Contributor, the Business and
the Assets, including employees, customers and suppliers and permit Pentegra
and its authorized representatives to inspect and make copies of all
documents, records and information with respect to the business or assets of
Contributor, the Business or the Assets as Pentegra or its representatives
may request. Contributor and Shareholders shall promptly notify Pentegra in
writing of (a) any notice or communication relating to a default or event
that, with notice or lapse of time or both, could become a default, under any
contract, commitment or obligation to which Contributor is a party or
relating to the Business or the Assets, and (b) any adverse change in
Contributor's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor
and Shareholders shall use their best efforts to secure all necessary
approvals and consents of third parties to the consummation of the
transactions contemplated hereby, including consents described on EXHIBIT
2.4. Contributor and Shareholders shall use their best efforts to obtain all
licenses, permits, approvals or other authorizations required under any law,
rule, regulation, or otherwise to provide the services of Contributor
contemplated by the Service Agreement and to conduct the intended business of
Contributor and operate the Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance
with the provisions hereof, Contributor and Shareholders shall not, and shall
use its best efforts to cause Contributor's employees, agents and
representatives not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer, including without limitation, any proposal or offer to any
Shareholder, with respect to a merger, acquisition, consolidation or similar
transaction involving, or the purchase of all or any significant portion of
the assets or any equity securities of Contributor or engage in any
negotiations concerning, or provide any confidential information or data to,
or have any discussions with, any person relating to such proposal or offer,
and Contributor and Shareholders will immediately cease any such activities,
discussions or negotiations heretofore conducted with respect to any of the
foregoing. Contributor and Shareholders shall immediately notify Pentegra if
any such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby covenants
and agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Contributor or any entity might have any liability
whatsoever arising from any insurance, pension plan, employment tax or
similar liability of Contributor to any employee or other person or entity
(including, without limitation, any Contributor Plan and any liability under
employment contracts with Contributor) allocable to services performed prior
to the Closing Date. Contributor and Shareholders acknowledge that the
purpose and intent of this covenant is to assure that Pentegra shall have no
unfunded liability whatsoever at any time after the Closing Date with respect
to any of Contributor's employees or similar persons or entities, including,
without limitation, any Contributor Plan for the period prior to the Closing
Date.
4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash
compensation of any Shareholder (other than in the ordinary course of
business) or other employee or an independent contractor of Contributor,
adopt, amend or terminate any compensation plan, employment agreement,
independent contractor agreement, employee policies and procedures or
employee benefit plan, take any action that could deplete the assets of any
employee benefit, or fail to pay any premium or contribution due or file any
report with respect to any employee benefit plan, or take any other actions
with respect to its employees or employee matters which might have an adverse
effect upon Contributor, its business, assets or prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be
<PAGE>
declared or paid by Contributor, nor will any repurchase of any of
Contributor's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Shareholders
shall use their best efforts to take, or cause to be taken, all actions
necessary to effect the acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Contributor and Shareholders will not
change in any material respect the tax or financial accounting methods or
practices followed by Contributor (including any material change in any
assumption underlying, or any method of calculating, any bad debt,
contingency or other reserve), except as may be required by law or generally
accepted accounting principles. Contributor and Shareholders will duly,
accurately and timely (without regard to any extensions of time) file all
returns, information statements and other documents relating to taxes of
Contributor required to be filed by it, and pay all taxes required to be paid
by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Contributor hereby waive any compliance with the applicable state Bulk
Transfers Act, if any. Contributor and Shareholders covenant and agree that
all of the creditors with respect to the Business and the Assets will be paid
in full by Contributor prior to the Closing Date, except to extent that any
liability to such creditors is assumed by Pentegra pursuant to this
Agreement. If required by Pentegra, Contributor and Shareholders shall
furnish Pentegra with proof of payment of all creditors with respect to the
Business and the Assets. Notwithstanding the foregoing, Contributor and
Shareholders may dispute the validity or amount of any such creditor's claim
without being deemed to be in violation of this SECTION 4.11, provided that
such dispute is in good faith and does not unreasonably delay the resolution
of the claim and provided, further that Contributor and Shareholders agree to
indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Contributor leases any of its premises from any
Shareholder or other affiliate of Contributor or any shareholder of
Contributor, Pentegra shall have entered into a building lease (the "Building
Lease") with the owner of such premises on terms and conditions satisfactory
to Pentegra, the terms and conditions of which shall include, without
limitation, (i) a five year initial term plus three five-year renewal
options, (ii) a lease rate equal to the fair market value lease rate, as
agreed to by Pentegra, and (iii) such other provisions to be acceptable to
Pentegra.
4.13 HIRING OF EMPLOYEES. Contributor and Shareholders shall cooperate
with all requests made by Pentegra for the purpose of allowing Pentegra to
hire those non-dental employees of Contributor designated by Pentegra, such
employment to be effective as of the Closing Date. Notwithstanding the
above, Contributor and Shareholders shall remain liable under any Contributor
Plans for any claims incurred by any employees or their spouses or
dependents, and for all compensation, bonuses, benefits and other such items
and other liabilities related to Contributor's employees incurred by
Contributor prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges that
all employees of Contributor hired by Pentegra pursuant to SECTION 4.13
above, shall be treated as "leased employees" (as defined in Code Section
414(n)) of Contributor and shall be treated as Clinic employees for purposes
of eligibility and participation in Contributor Plans.
4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates to
be named as an additional insured on its liability insurance programs,
effective as of the Closing Date.
SECTION 5. COVENANTS OF PENTEGRA.
<PAGE>
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS.
Pentegra, Shareholders and Contributor agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Contributor and Shareholders
shall cooperate to promptly prepare and file with the Securities Exchange
Commission ("SEC") the Registration Statement on Form S-1 (or other
appropriate Form) to be filed by Pentegra in connection with its Initial
Public Offering (including the prospectus constituting a part thereof, the
"Registration Statement"). Pentegra shall obtain all necessary state
securities laws or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement and the Contributor and
Shareholders shall furnish all information concerning Contributor and
Shareholders as may be reasonable requested in connection with any such
action.
Pentegegra, Contributor and Shareholder represent and warrant that none
of the information or documents supplied or to be supplied by it specifically
for inclusion in the Registration Statement, by exhibit or otherwise, will,
at the time the Registration Statement and each amendment or supplement
thereto, if any, becomes effective under the Securities Act of 1933, 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, in
light of the circumstances under which they were made, not misleading.
Contributor and Shareholders shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.
Contributor and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by
Pentegra in connection with the preparation of the Registration Statement and
each amendment or supplement thereto, or any other statement, filing, notice
or application made by or on behalf of each such party or any of its
subsidiaries to any governmental entity in connection with the transactions
contemplated by the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Contributor and Shareholders contained herein shall have been true and
correct in all respects when initially made and shall be true and correct in
all respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Contributor and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Contributor and Shareholders
prior to the Closing Date.
<PAGE>
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Contributor shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Contributor, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and Pentegra
shall have executed and delivered a Service Agreement (the "Service
Agreement"), in substantially the form attached hereto as EXHIBIT 7.7,
pursuant to which Pentegra will provide management services to the
Contributor. Each Shareholder shall have executed and delivered a Guaranty
Agreement in substantially the form attached as EXHIBIT 4.10 of the Service
Agreement pursuant to which Shareholder shall, among other things, guaranty
the obligations of Contributor under the Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated, and
caused each shareholder of Contributor that has an existing employment
agreement with Contributor to have terminated his or her employment agreement
with Contributor and shall have executed an employment agreement ("Employment
Agreement") with Contributor in form and substance attached hereto as EXHIBIT
7.8 and otherwise satisfactory to Contributor and Pentegra.
7.9 CONSENTS AND APPROVALS. Contributor and Shareholders shall have
obtained all necessary government and other third-party approvals and
consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables
or payables between Contributor and its shareholders or affiliates and
Contributor shall not have any liabilities, including indebtedness,
guaranties and capital leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Contributor and Shareholders shall have named Pentegra
as an additional insured on their liability insurance program in accordance
with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Contributor since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The
<PAGE>
Pentegra Common Stock shall have been approved for listing on Nasdaq or other
exchange selected by Pentegra, subject only to official notification of
issuance.
SECTION 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Contributor and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pentegra contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Contributor shall have received all documents,
duly executed in form satisfactory to Contributor and its counsel, referred
to in SECTION 9.2, including, without limitation, the Service Agreement.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. Within five business
days after requested by Pentegra, Contributor and Shareholders shall deliver
to Pentegra the following, all of which shall be in a form satisfactory to
counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel
for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or
letter agreement in form and substance mutually acceptable to the parties
hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of
Contributor authorizing the execution, delivery and performance of this
Agreement, the Service Agreement, the Employment Agreements and all related
documents and agreements each certified by the Secretary as being true and
correct copies of the original thereof;
<PAGE>
(d) a bill of sale conveying the Assets to Pentegra;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(f) certificates of the Shareholders and a duly authorized officer
of Contributor dated as of the Closing Date, (i) as to the truth and
correctness of the representations and warranties of Contributor and
Shareholder contained herein; (ii) as to the performance of and compliance by
Contributor and Shareholder with all covenants contained herein; and (iii)
certifying that all conditions precedent of Contributor and Shareholders to
the Closing have been satisfied;
(g) a certificate of the Secretary of Contributor certifying as to
the incumbency of the directors and officers of Contributor and as to the
signatures of such directors and officers who have executed documents
delivered at the Closing on behalf of Contributor;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Contributor and any state of
required foreign qualification of Contributor establishing that Contributor
is in existence and is in good standing to transact business in its state of
incorporation;
(i) an opinion of counsel to Contributor and Shareholder opining as
to the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Contributor, the enforceability of this Agreement and the other agreements
and documents to be executed in connection herewith, and other matters
reasonably requested by Pentegra;
(j) non-foreign affidavits executed by Contributor;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Contributor, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Contributor and Shareholder, the following, all of which
shall be in a form satisfactory to counsel to Contributor and Shareholders
and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in
escrow pending Closing, pursuant to an escrow agreement or letter agreement
in form and substance mutually acceptable to the parties hereto:
(a) the Acquisition Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
<PAGE>
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Contributor;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Contributor;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Contributor to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit attached hereto, any agreement executed pursuant hereto, and
any certificate executed and delivered by any party pursuant to the terms of
this Agreement, shall constitute representations and warranties of
Contributor and Shareholders, jointly and severally, or of Pentegra, as the
case may be. All such representations and warranties, and all
representations and warranties expressly labeled as such in this Agreement
shall survive the date of this Agreement and the Closing Date for a period of
five (5) years following the Closing Date, except that (i) the
representations and warranties with respect to environmental and medical
waste laws and health care laws and matters shall survive for a period of
fifteen (15) years and tax representations shall survive until one year after
the expiration of the applicable statute of limitations. Each party covenants
with the other parties not to make any claim with respect to such
representations and warranties, against any party after the date on which
such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof,
unless such party has timely given the notice required in SECTION 10.2, 10.3
or 10.4 hereof, as the case may be. Each party hereby releases, acquits and
discharges the other party from any and all claims and demands, actions and
causes of action, damages, costs, expenses and rights of setoff with respect
to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable,
are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD CONTRIBUTOR AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES
(EACH OF THE FOREGOING, INCLUDING CONTRIBUTOR AND SHAREHOLDERS, FOR PURPOSES
OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN
"INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES,
LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING,
BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH
APPEAL) ARISING FROM
<PAGE>
OR BY REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS,
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
(D) TAXES OF PENTEGRA ARISING FROM OR AS A RESULT OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT, AND
(F) ANY LIABILITY OF PENTEGRA FOR COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION,
PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR
THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. CONTRIBUTOR AND
SHAREHOLDERS (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT
APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL
INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS,
SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND
EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR
WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER, AND
<PAGE>
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS WHETHER ON OR
AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY CONTRIBUTOR OR ITS SHAREHOLDERS OR THEIR
CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE
OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR
OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE CONTRIBUTOR OR
SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER
ON OR AFTER THE CLOSING DATE,
(E) TAXES OF CONTRIBUTOR OR ANY SHAREHOLDER OR ANY OTHER PERSON OR
ENTITY RELATED TO OR AFFILIATED WITH THE CONTRIBUTOR OR SHAREHOLDER ARISING
FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF CONTRIBUTOR OR THE SHAREHOLDERS FOR COSTS AND
EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN
CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN
CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS
SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE CONTRIBUTOR OR
ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS,
THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
CONTRIBUTOR OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO
MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or
<PAGE>
reimbursement may be sought hereunder, or within such lesser time as may be
provided by law for the defense of such action or proceeding, such
Indemnified Person shall notify Indemnitor thereof. If any such action or
other proceeding shall be brought against any Indemnified Person, Indemnitor
shall, upon written notice given within a reasonable time following receipt
by Indemnitor of such notice from Indemnified Person, be entitled to assume
the defense of such action or proceeding with counsel chosen by Indemnitor
and reasonably satisfactory to Indemnified Person; provided, however, that
any Indemnified Person may at its own expense retain separate counsel to
participate in such defense. Notwithstanding the foregoing, Indemnified
Person shall have the right to employ separate counsel at Indemnitor's
expense and to control its own defense of such action or proceeding if, in
the reasonable opinion of counsel to such Indemnified Person, (a) there are
or may be legal defenses available to such Indemnified Person or to other
Indemnified Persons that are different from or additional to those available
to Indemnitor and which could not be adequately advanced by counsel chosen by
Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor
and such Indemnified Person that would make such separate representation
advisable; provided, however, that in no event shall Indemnitor be required
to pay fees and expenses hereunder for more than one firm of attorneys of
Indemnified Person in any jurisdiction in any one action or proceeding or
group of related actions or proceedings. Indemnitor shall not, without the
prior written consent of any Indemnified Person, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim,
action or proceeding to which such Indemnified Person is a party unless such
settlement, compromise or consent includes an unconditional release of such
Indemnified Person from all liability arising or potentially arising from or
by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Contributor or any Shareholder
giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof,
Pentegra shall be entitled to offset the amount of damages incurred by it as
a result of such breach of warranty, representation, covenant or agreement
against any amounts payable by Pentegra, including the amounts payable under
the Service Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of
Contributor or Shareholder contained in this Agreement or in any certificate
or other document executed and delivered by Contributor or any Shareholder
pursuant to this Agreement is or becomes untrue or breached in any material
respect or if Contributor or any Shareholder fails to comply in any material
respect with any covenant or agreement contained herein, and any such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;
(c) at any time by Contributor or any Shareholder if any representation
or warranty of Pentegra contained in this Agreement or in any certificate or
other document executed and delivered by Pentegra pursuant to this Agreement
is or becomes untrue or breached in any material respect or if Pentegra fails
to comply in any material respect with any covenant or agreement contained
herein and such misrepresentation, noncompliance or breach is not cured,
waived or eliminated within twenty (20) days after receipt of written notice
thereof;
(d) by Pentegra, Shareholders or Contributor if the transaction
contemplated hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Contributor, that such termination
is desirable and in the best interests of Pentegra.
<PAGE>
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Contributor shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares
of Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer
shall be treated as effective for any purpose or (b) engage in any
transaction, whether or not with respect to any shares of Pentegra Common
Stock or any interest therein, the intent or effect of which is to reduce the
risk of owning shares of Pentegra Common Stock. The certificates evidencing
the Pentegra Common Stock delivered to Contributor pursuant to the terms
hereof will bear a legend substantially in the form set forth below and
containing such other information as Pentegra may deem necessary or
appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Shareholders
acknowledge that the shares of Pentegra Common Stock to be delivered to
Contributor pursuant to this Agreement have not been and will not be
registered under the Securities Act of 1933 and may not be resold without
compliance with the Securities Act of 1933. The Pentegra Common Stock to be
acquired by Contributor pursuant to this Agreement is being acquired solely
for its own account, for investment purposes only and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution. Contributor covenants, warrants and represents that
none of the shares of Pentegra Common Stock issued to it will be offered,
sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
except after full compliance with all of the applicable provisions of the
Securities Act, as amended, and the rules and regulations of the Securities
Exchange Commission and applicable state securities laws and regulations.
All certificates evidencing shares of Pentegra Common Stock shall bear the
following legend in addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock
shall bear any legend required by the securities or blue sky laws of any
state where Contributor resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Shareholders are
able to bear the economic risk of an investment in Pentegra Common Stock
acquired pursuant to this Agreement and can afford to sustain a total loss of
such investment and have such knowledge and experience in financial and
business matters that they are capable of evaluating the merits and risks of
the proposed investment and therefore have the capacity to protect their own
interests in connection with the acquisition of the Pentegra Common Stock.
Contributor, Shareholders and their representatives have had an adequate
opportunity to ask questions and receive answers from the officers of
Pentegra concerning any and all matters relating to the background and
experience of the officers and directors of Pentegra, the plans for the
operations of the business of Pentegra, and any plans for additional
acquisitions and the like. Contributor, Shareholders and their
representatives have asked any and all questions in the nature described in
the preceding sentence and all questions have been answered to their
satisfaction. Contributor and Shareholders are "accredited investors"
<PAGE>
as defined in Regulation D of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Contributor and Shareholders agree that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally
through no fault of Contributor or Shareholders, (ii) disclosure is required
by law or the order of any governmental authority under color of law,
provided, that prior to disclosing any information pursuant to this clause
(ii), Contributor and Shareholders shall, if possible, give prior written
notice thereof to the other parties hereto, and provide such other parties
hereto with the opportunity to contest such disclosure, (iii) Contributor and
Shareholders reasonably believe that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party, or
(iv) Contributor and Shareholders are the sole and exclusive owner of such
confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Contributor or Shareholders of the provisions of this SECTION 13, Pentegra
shall be entitled to an injunction restraining Contributor and Shareholders
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Pentegra from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. The obligations of the parties under this SECTION 13 shall
survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement, together with the transactions contemplated by the Other
Agreement and the Initial Public Offering, will qualify as an exchange
meeting the requirements of Section 351 of the Code. The tax returns (and
schedules thereto) of Shareholders, Contributor and Pentegra shall be filed
in a manner consistent with such intention and Contributor and Pentegra shall
each provide the other with such tax information, reports, returns or
schedules as may be reasonably required to assist the other in so reporting
the transactions contemplated hereby. No party hereto shall take any action
inconsistent with this transaction qualifying as an exchange meeting the
requirements of Section 351 of the Code.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
<PAGE>
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Contributor or Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Contributor or any Shareholder for
services rendered in connection with negotiating and closing the transactions
contemplated by this Agreement or the documents to be executed in connection
herewith, whether or not such costs or expenses are incurred before or after
the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Contributor.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF
CONTRIBUTOR AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS
PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
<PAGE>
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one and the
same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and
shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Contributor, be relieved from its
obligations to Contributor under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand,
or Contributor, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Contributor and Pentegra as of the Closing Date, and the
prorated amount due Pentegra shall be credited to the cash portion of the
Purchase Consideration. Upon payment by Pentegra of such taxes actually
assessed and paid on the Assets, Pentegra shall calculate the apportionment
of such taxes and shall pay Contributor or may demand from Contributor, and
Contributor agrees to pay, the amount necessary to correct the estimate and
proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Contributors or Shareholders (hereinafter referred to as a "Party"), whether
made before or after the institution of any legal proceeding, any dispute
among the parties hereto in any way arising out of, related to, or in
connection with this Agreement (hereinafter a "Dispute"), shall be resolved
by binding arbitration in accordance with the terms of this Section
(hereinafter the "Arbitration Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
<PAGE>
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or foreclosing upon any
personal property in which there has been granted a security interest or lien
by a Party in the Documents. In Disputes involving indebtedness or other
monetary obligations, each Party agrees that the other Party may proceed
against all liable persons, jointly and severally against one or more of
them, without impairing rights against other liable persons. Nor shall a
Party be required to join the principal obligor or any other liable persons
(e.g., sureties or guarantors) in any proceeding against a particular person.
A Party may release or settle with one or more liable persons as the Party
deems fit without releasing or impairing rights to proceed against any
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoeniz,
Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the
<PAGE>
ordinary course of business of the Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be found
to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect. In lieu of such
provision, there shall be added automatically as part of this Agreement, a
provision as similar in its terms to such provision as may be possible and be
legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
FAMILY DENTAL CENTERS, P.A.
By: /s/ S. Anderson, DDS
------------------------------------
Its: /s/ Owner
-----------------------------------
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
------------------------------------
Its: Senior Vice President
-----------------------------------
/S/ S. ANDERSON
----------------------------------------
Steve Anderson, D.D.S.
/S/ L. ANDERSON
----------------------------------------
Lindi B. Anderson, D.D.S.
<PAGE>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
and
RICHARD H. FETTIG, D.D.S.
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . 2
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . 3
2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . 3
2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . 3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . 3
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . 3
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . 3
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . 6
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . 6
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . 6
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . 6
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . 7
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . 7
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . 7
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . 7
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . 7
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . 8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . 8
3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . 8
3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . 8
3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . 8
Section 4. COVENANTS OF DENTIST.
4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . 9
<PAGE>
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . 9
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . 9
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . 9
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . 9
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . .10
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . .10
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . .10
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . .10
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . .10
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . .10
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . .10
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . .11
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . .11
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . .11
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . .11
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . .11
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . .11
Section 6. COVENANTS OF PENTEGRA AND DENTIST
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . .12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . .12
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . .12
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . .12
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . .12
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . .12
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . .12
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . .13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . .13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . .13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . .13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . .13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . .13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . .13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . .13
Section 8. DENTIST'S CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . .13
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . .13
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . .13
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . .13
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . .14
<PAGE>
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . .14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . .15
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . .15
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . .16
10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . .16
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . .17
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . .18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . .18
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . .19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . .19
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . .19
14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . .20
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . .20
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . .20
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . .20
14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . .21
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .21
14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . .21
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . .21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . .21
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . .21
14.12 NO RULE OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . .21
14.13 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . .21
14.14 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . .21
14.15 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . .21
14.16 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . .22
14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . .23
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed
effective August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra") and RICHARD H. FETTIG, D.D.S. ("Dentist").
WITNESSETH:
WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires
to receive from Dentist, certain assets of Dentist;
WHEREAS, Pentegra or its affiliated designee has entered into or intends to
enter into Agreements and Plans of Reorganization, Asset Contribution Agreements
and other acquisition agreements (collectively, the "Other Agreements") with
such persons or entities or the stockholders of such entities listed on EXHIBIT
A (together with Dentist, the "Target Companies");
WHEREAS, it is intended for Federal income tax purposes that the transfers
contemplated by this Agreement, the Other Agreements and Pentegra's initial
public offering ("Initial Public Offering") of shares of its common stock, par
value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange
within the meaning of Section 351 of the Internal Revenue Code of 1986, as
amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock
is consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions
contained herein, on the Closing Date, Dentist shall convey, transfer, deliver
and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all
of Dentist's right, title and interest in and to those certain assets described
on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively
"Assets"), free and clear of all obligations, security interests, claims, liens
and encumbrances, except as specifically assumed, or taken subject to, by
Pentegra pursuant to SECTION 1.3(b) hereof.
<PAGE>
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and contributed hereunder, and Dentist shall retain all of its
right, title and interest in and to, the assets not specifically transferred
hereunder, including without limitation, the assets described on EXHIBIT 1.2
(the "Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Dentist contained
herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Dentist the consideration specified in
ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b)
attached hereto to the extent that such obligations, commitments, liabilities
and indebtedness are current and not otherwise in default. (the "Assumed
Liabilities"). Notwithstanding any contrary provision contained herein,
Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i)
any liability, commitment or obligation or trade payable or indebtedness not
specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on
EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under
such contracts, leases, commitments or obligations which occurred on or before
the Closing Date; (iii) any liability for any employee benefits payable to
employees of Dentist, including, but not limited to, liabilities arising under
any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any liability based
upon or arising out of a violation of any antitrust or similar restraint-of-
trade laws by Dentist, including, without limiting the generality of the
foregoing, any such antitrust liability which may arise in connection with
agreements, contracts, commitments or orders for the sale of goods or provision
of services by Dentist reflected on the books of Dentist at or prior to the
Closing Date; (v) any liability based upon or arising out of any tortious or
wrongful actions of Dentist, any licensed professional employee or independent
contractor of Dentist, (vi) any liability for the payment of any taxes of
Dentist, including without limitation, sales, use and other transfer taxes and
income taxes arising from or by reason of the transactions contemplated by this
Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real
property; nor (viii) any liability incurred or to be incurred pursuant to any
malpractice or other suits or actions pending against Dentist.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement, the
Dentist shall execute and deliver all such deeds, bills of sale, assignments and
assurances and take and do all such other actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right, title and interest
in, to and under the Assets in Pentegra or otherwise to carry out this
Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
Dentist hereby represents and warrants to Pentegra as follows:
2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the
State of North Dakota. Dentist does not have any assets, employees or offices
in any state other than the state set forth in the first sentence of this
SECTION 2.1.
2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and
perform this Agreement and the other agreements to be executed and delivered in
connection herewith. This Agreement
<PAGE>
and all agreements and documents executed and delivered in connection
herewith have been, or will be as of the Closing Date, duly executed and
delivered by Dentist and constitute or will constitute the legal, valid and
binding obligations of Dentist in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of
consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, result in the acceleration of, any obligation
under any mortgage, lien, lease, agreement, rent, instrument, order,
arbitration award, judgment or decree to which Dentist is a party or by which
Dentist is bound, or violate any material restrictions of any kind to which
Dentist is subject, or result in any lien or encumbrance on any of Dentist's
assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets, or
waivers thereof, have been duly obtained and are in full force and effect and
are described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Dentist, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses or
permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Dentist.
2.5 [INTENTIONALLY DELETED].
2.6 [INTENTIONALLY DELETED].
2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any related
unaudited statements of income, retained earnings, schedule of accounts
receivable, accounts payable and accrued liabilities, and cash flows for the
twelve months then ended (collectively, with the related notes thereto, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and results of operations of Dentist as of the dates and for the
periods indicated and reflect all fixed and contingent liabilities of Dentist.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Dentist leases, as lessor or lessee, real or personal property
used in operating the Business, related to the Assets or otherwise. All such
leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their
respective terms, and there is not under any such lease any existing default by
Dentist, as lessor or lessee, or any condition or event of which Dentist has
knowledge which with notice or lapse of time, or both, would constitute a
default, in respect of which Dentist has not taken adequate steps to cure such
default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Dentist has no knowledge of any
latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and
marketable title to all
<PAGE>
of the Assets, free and clear of any liens, claims, charges, exceptions or
encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10
attached hereto. Dentist shall cause all encumbrances set forth on EXHIBIT
2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be
released or terminated prior to the Closing Date and evidence of such
releases of liens and claims shall be provided to Pentegra on the Closing
Date and the Assets shall not be used to satisfy such liens, claims or
encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned or
used by Dentist, are in good, current, standard and merchantable condition and
are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Dentist has no right, title or interest in or to patents, patent rights,
corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT
2.12 is a listing of all names of all predecessor companies of Dentist,
including the names of any entities from whom Dentist previously acquired
significant assets. Except for off-the-shelf software licenses and except as
set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of any patents,
trademarks, service marks, trade names, copyrights or applications therefor, or
manufacturing processes, formulas or trade secrets or similar items and no such
licenses are necessary for the conduct of the Business or the use of the Assets.
No claim is pending or has been made to the effect that the Assets or the
present or past operations of Dentist in connection with the Assets or Business
infringe upon or conflict with the asserted rights of others to any patents,
patent rights, manufacturing processes, trade names, trademarks, service marks,
inventions, licenses, specialized treatment protocols, copyrights, formulas,
know-how and trade secrets. Dentist has the sole and exclusive right to use all
Assets constituting proprietary rights without infringing or violating the
rights of any third parties and no consents of any third parties are required
for the use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on
EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this
Agreement of: (a) the most recent payroll report of Dentist, showing all current
employees of Dentist and their current levels of compensation, (b) promised
increases in compensation of employees of Dentist that have not yet been
effected, (c) oral or written employment agreements, consulting agreements or
independent contractor agreements (and all amendments thereto) to which Dentist
is a party, copies of which have been delivered to Pentegra, and (d) all
employee manuals, materials, policies, procedures and work-related rules, copies
of which have been delivered to Pentegra. Dentist is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Dentist has not engaged in any unfair labor practice.
There are no unfair labor practices charges or complaints pending or threatened
against Dentist, and Dentist has never been a party to any agreement with any
union, labor organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the
Assets is subject to any pending, nor does Dentist have knowledge of any
threatened, litigation, governmental investigation, condemnation or other
proceeding against or relating to or affecting Dentist, the Business, the Assets
or the transactions contemplated by this Agreement, and, to the knowledge of
Dentist, no basis for any such action exists, nor is there any legal impediment
of which Dentist has knowledge to the continued operation of its business or the
use of the Assets in the ordinary course, subject to consents set forth on
EXHIBIT 2.4.
2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts, obligations
and commitments of Dentist ("Contracts"), entered into in connection with and
related to the Assets or the Business, all of which are listed or incorporated
by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case
of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than
leases) attached hereto. Except as otherwise indicated on such Exhibits, all of
such Contracts are valid, binding and enforceable in accordance with their terms
and are in full force and effect, and no defenses, offsets or counterclaims have
been asserted or may be made by any party thereto.
<PAGE>
Except as indicated on such Exhibits, there is not under any such Contract
any existing default by Dentist, or any condition or event of which Dentist
has knowledge which with notice or lapse of time, or both, would constitute a
default. Dentist has no knowledge of any default by any other party to such
Contracts. Dentist has not received notice of the intention of any party to
any Contract to cancel or terminate any Contract and have no reason to
believe that any amendment or change to any Contract is contemplated by any
party thereto. Other than those contracts, obligations and commitments
listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist is not a party
to any material written or oral agreement contract, lease or arrangement,
including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product or
service;
(h) Loan agreement or other contract for money borrowed or lent or to
be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of the
Dentist, oral or written, that provide for prepayments or deferred installment
payments; or
(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Dentist on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) or entered into any contract, lease, license or
commitment, except in connection with the performance of this Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued, contingent
or otherwise) other than (i) liabilities shown or reflected on the Balance
Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary
course of business;
(c) Made any payments to or loaned any money to any person or entity
other than in the ordinary course of business;
<PAGE>
(d) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(e) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have been
required due to income or operations of Dentist since the Balance Sheet Date;
(f) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(g) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(h) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants or
agents, or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of any officer, employee, consultant or agent;
(i) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00);
(j) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(k) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties, assets
or business or the Business or the Assets, or experienced any other material
adverse change in its financial condition, assets, prospects, liabilities or
business; or
(l) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it. All such tax returns are complete and accurate in all respects and
properly reflect the relevant taxes for the periods covered thereby. Dentist
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Dentist. There are no audits relating to taxes of
Dentist pending or in process or, to the knowledge of Dentist, threatened.
Dentist is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency. There are no
liens or encumbrances relating to taxes on or threatened against any of the
assets of Dentist. Dentist has withheld and paid all taxes required by law to
have been withheld and paid by it. Neither Dentist nor any predecessor of
Dentist is or has been a party to any tax allocation or sharing agreement or a
member of an affiliated group of corporations filing a consolidated Federal
income tax return. Dentist has delivered to Pentegra correct and complete
copies of Dentist's three most recently filed annual state, local and Federal
income tax returns, together with all examination reports and statements of
deficiencies assessed against or agreed to by Dentist during the three calendar
year period preceding the date of this Agreement. Dentist has neither made any
payments, is obligated to make any payments, or is a party to any agreement that
under any circumstance could obligate it to make any payments that will not be
deductible under Code section 280G.
(b) Dentist does not intend to dispose of any of the shares of Pentegra
Common Stock to be received hereunder and is not a party to any plan,
arrangement or agreement for the disposition of such shares.
<PAGE>
Nothing contained herein shall prohibit Dentist from selling such shares of
Pentegra Common Stock after the designated holding period and in accordance
with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated by
this Agreement which may be now or hereafter asserted against Pentegra, Dentist
resulting from any action taken by Dentist or their respective agents or
employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against
on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and
has not incurred since that date and will not have incurred as of the Closing
Date, any liabilities or obligations of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, other than those
incurred in the ordinary course of business or as set forth on EXHIBIT 2.16.
Dentist does not know, or have reasonable grounds to know, of any basis for the
assertion against Dentist as of the Balance Sheet Date, of any claim or
liability of any nature in any amount not fully reflected or reserved against on
the Balance Sheet, or of any claim or liability of any nature arising since that
date other than those incurred in the ordinary course of business or
contemplated by this Agreement. All indebtedness of Dentist (including without
limitation, indebtedness for borrowed money, guaranties and capital lease
obligations) is described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist
carries property, liability, malpractice, workers' compensation and such other
types of insurance as is customary in the industry. Valid and enforceable
policies in such amounts are outstanding and duly in force and will remain duly
in force through the Closing Date. All such policies are described in EXHIBIT
2.20 attached hereto and true and correct copies have been delivered to
Pentegra. Dentist has not received notice or other communication from the
issuer of any such insurance policy cancelling or amending such policy or
threatening to do so. Neither Dentist nor any licensed professional employee of
Dentist has any outstanding claims, settlements or premiums owed against any
insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached
hereto, Dentist has neither established, nor maintains, nor is obligated to make
contributions to or under or otherwise participate in, (a) any bonus or other
type of compensation or employment plan, program, agreement, policy, commitment,
contract or arrangement (whether or not set forth in a written document); (b)
any pension, profit-sharing, retirement or other plan, program or arrangement;
or (c) any other employee benefit plan, fund or program, including, but not
limited to, those described in SECTION 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT
2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been
operated and administered in all material respects in accordance with all
applicable laws, rules and regulations, including without limitation, ERISA, the
Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of
1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination
in Employment Act of 1967, as amended, and the related rules and regulations
adopted by those Federal agencies responsible for the administration of such
laws. No act or failure to act by Dentist has resulted in a "prohibited
transaction" (as defined in ERISA) with respect to the Dentist Plans. No
"reportable event" (as defined in ERISA) has occurred with respect to any of the
Dentist Plans. Dentist has not previously made, is not currently making, and is
not obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Dentist Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at least equal to the value
of plan liabilities or (ii) the value of plan liabilities in excess of plan
assets is disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing
Date, a party to any agreement or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree, rule or
regulation that materially and adversely affects the condition (financial or
<PAGE>
otherwise), operations, assets, liabilities, business or prospects of
Dentist, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed
professional employees, and the conduct of the Business and use of the Assets,
have complied with all applicable laws, rules, regulations and licensing
requirements, including, without limitation, the Federal Environmental
Protection Act, the Occupational Safety and Health Act, the Americans with
Disabilities Act and any environmental laws and medical waste laws, and there
exist no violations by Dentist or any licensed professional employee of Dentist
of any Federal, state or local law or regulation. Dentist has not received any
notice of a violation of any Federal, state and local laws, regulations and
ordinances relating to the operations of the Business and Assets and no notice
of any pending inspection or violation of any such law, regulation or ordinance
has been received by Dentist.
2.24 THIRD PARTY PAYORS. Dentist and each licensed professional employee
or independent contractor of Dentist has timely filed all claims or other
reports required to be filed with respect to the purchase of services by third-
party payors, and all such claims or reports are complete and accurate, and has
no liability to any payor with respect thereto. There are no pending appeals,
overpayment determinations, adjustments, challenges, audit, litigation or
notices of intent to open Medicare or Medicaid claim determinations or other
reports required to be filed by Dentist and each licensed professional employee
of Dentist. Neither Dentist nor any licensed professional employee of Dentist
has been convicted of, or pled guilty or nolo contendere to, patient abuse or
negligence, or any other Medicare or Medicaid program related offense and none
has committed any offense which may serve as the basis for suspension or
exclusion from the Medicare and Medicaid programs or any other third party payor
program. With respect to payors, Dentist and Dentist's licensed professional
employees has not (a) knowingly and willfully making or causing to be made a
false statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in determining
rights to any benefit or payment; (c) failed to disclose knowledge of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist
in this Agreement, and no Exhibit or certificate issued or executed by, or
information furnished by Dentist or to be furnished by Dentist to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Dentist has with any bank or other
financial institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or
employee or family member of Dentist, or their respective spouses, children or
affiliates, owns directly or indirectly, on an individual or joint basis, any
interest in, has a compensation or other financial arrangement with, or serves
as an officer or director of, any customer or supplier or competitor of Dentist
or any organization that has a material contract or arrangement with Dentist.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of
the names and addresses of each payor of Dentist's services which accounted for
more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has
good relations with all such payors and other material payors of Dentist and
none of such payors has notified Dentist that it intends to discontinue its
relationship with Dentist or to deny
<PAGE>
any claims submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Dentist as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions required
by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize
the execution, delivery and performance of this Agreement and such related
documents. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing Date,
duly executed and delivered by Pentegra and constitute or will constitute the
legal, valid and binding obligations of Pentegra, enforceable against Pentegra
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and delivery
of this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and, the
consummation of the actions contemplated hereby will not, violate any provision
of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or decree
to which Pentegra is a party or by which Pentegra is bound, or violate any
material restrictions of any kind to which Pentegra is subject, or result in any
lien or encumbrance on any of Pentegra's assets. Other than as have been
obtained or as would not have a material adverse effect, there are no consents
of any person or entity required for the transaction contemplated hereby on
behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would not
have a material adverse effect, there are no proceedings pending or, to the
knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses or
permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any pending,
nor does Pentegra have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Pentegra, its business, assets or the transactions contemplated by
this Agreement, and, to the knowledge of Pentegra, no basis for any such action
exists, nor is there any legal impediment of which Pentegra has knowledge to the
continued operation of its business or the use of its Assets in the ordinary
course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports and
other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it, other than as would not have a material adverse effect. Pentegra
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Pentegra. There are no audits relating to taxes of
Pentegra pending or in process or, to the knowledge of Pentegra, threatened.
Pentegra is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency.
<PAGE>
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra
in this Agreement, and no Exhibit or certificate issued by officers or directors
of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements or facts contained therein not
misleading.
SECTION 4. COVENANTS OF DENTIST.
Dentist agrees that between the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and conditions. Dentist agrees to complete the
Exhibits hereto to be provided by him in form and substance satisfactory to
Pentegra.
4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the
Assets in the ordinary course. Dentist shall not enter into any lease,
contract, indebtedness, commitment, purchase or sale or acquire or dispose of
any capital asset relating to the Business or the Assets except in the ordinary
course of business. Dentist shall use their best efforts to preserve the
Business and Assets intact and shall not take any action that would have an
adverse effect on the Business or Assets. Dentist shall use their best efforts
to preserve intact the relationships with payors, customers, suppliers, patients
and others having significant business relations with Dentist. Dentist shall
collect its receivables and pay its trade payables in the ordinary course of
business. Dentist shall not introduce any new method of management, operations
or accounting.
4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized
representatives access to, and make available for inspection, all of the assets
and business of Dentist, the Business and the Assets, including employees,
customers and suppliers and permit Pentegra and its authorized representatives
to inspect and make copies of all documents, records and information with
respect to the business or assets of Dentist, the Business or the Assets as
Pentegra or its representatives may request. Dentist shall promptly notify
Pentegra in writing of (a) any notice or communication relating to a default or
event that, with notice or lapse of time or both, could become a default, under
any contract, commitment or obligation to which Dentist is a party or relating
to the Business or the Assets, and (b) any adverse change in Dentist's or the
Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall
use his best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby, including
consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain
all licenses, permits, approvals or other authorizations required under any law,
rule, regulation, or otherwise to
<PAGE>
provide the services of the Practice contemplated by the Service Agreement
and to conduct the intended business of the Practice and operate the Business
and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of Closing or the termination of this Agreement in accordance with the
provisions hereof, Dentist shall not, and shall use its best efforts to cause
Dentist's employees, agents and representatives not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making or implementation
of any proposal or offer, including without limitation, any proposal or offer to
the Dentist, with respect to a merger, acquisition, consolidation or similar
transaction involving, or the purchase of all or any significant portion of the
assets or any equity securities of Dentist or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to such proposal or offer, and Dentist
will immediately cease any such activities, discussions or negotiations
heretofore conducted with respect to any of the foregoing. Dentist shall
immediately notify Pentegra if any such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund completely
for any accrued benefits, where applicable, or vested accrued benefits for which
Dentist or any entity might have any liability whatsoever arising from any
insurance, pension plan, employment tax or similar liability of Dentist to any
employee or other person or entity (including, without limitation, any Dentist
Plan and any liability under employment contracts with Dentist) allocable to
services performed prior to the Closing Date. Dentist acknowledges that the
purpose and intent of this covenant is to assure that Pentegra shall have no
liability whatsoever at any time after the Closing Date with respect to any of
Dentist's employees or similar persons or entities, including, without
limitation, any Dentist Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of the Dentist (other than in the ordinary course of business) or other employee
or an independent contractor of Dentist, adopt, amend or terminate any
compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect upon Dentist, its business, assets or
prospects.
4.8 [INTENTIONALLY OMITTED].
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best
efforts to take, or cause to be taken, all actions necessary to effect the
acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material
respect the tax or financial accounting methods or practices followed by Dentist
(including any material change in any assumption underlying, or any method of
calculating, any bad debt, contingency or other reserve), except as may be
required by law or generally accepted accounting principles. Dentist will
duly, accurately and timely (without regard to any extensions of time) file all
returns, information statements and other documents relating to taxes of Dentist
required to be filed by it, and pay all taxes required to be paid by it, on or
before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive
any compliance with the applicable state Bulk Transfers Act, if any. Dentist
covenants and agrees that all of the creditors with respect to the Business and
the Assets will be paid in full by Dentist prior to the Closing Date, except to
extent that any liability to such creditors is assumed by Pentegra pursuant to
this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with
proof of payment of all creditors with respect to the Business and
<PAGE>
the Assets. Notwithstanding the foregoing, Dentist may dispute the validity
or amount of any such creditor's claim without being deemed to be in
violation of this SECTION 4.11, provided that such dispute is in good faith
and does not unreasonably delay the resolution of the claim and provided,
further that Dentist agrees to indemnify and bond Pentegra for such amounts
as is satisfactory to Pentegra.
4.12 LEASE. If Dentist leases any of its premises from the Dentist or
other affiliate of Dentist, Pentegra shall have entered into a building lease
(the "Building Lease") with the owner of such premises on terms and conditions
satisfactory to Pentegra, the terms and conditions of which shall include,
without limitation, (i) a five year initial term plus three five-year renewal
options, (ii) a lease rate equal to the fair market value lease rate, as agreed
to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made
by Pentegra for the purpose of allowing Pentegra to hire those non-dental
employees of Dentist designated by Pentegra, such employment to be effective as
of the Closing Date. Notwithstanding the above, Dentist shall remain liable
under any Dentist Plans for any claims incurred by any employees or their
spouses or dependents, and for all compensation, bonuses, benefits and other
such items and other liabilities related to Dentist's employees incurred by
Dentist prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all
employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be
treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and
shall be treated as Clinic employees for purposes of eligibility and
participation in Dentist Plans.
4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective as
of the Closing Date.
4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited
liability company, partnership or other legal entity (the "Practice") approved
by Pentegra for the purpose of practicing dentistry and entering into the
Service Agreement. The Practice shall be duly organized, in existing and in
good standing under the laws of the State in which the Dentist and the Practice
are to practice dentistry. The Practice shall have all necessary power to own
all of its assets and to carry on its business as such business is now being
conducted. The Dentist shall be the sole member/shareholder/partner of the
Practice and own all such interests free of all security interests, claims,
encumbrances and liens. Each interest in the Practice shall be legally and
validly issued and fully paid and nonassessable. There shall be no outstanding
(a) bonds, debentures, notes or other obligations the holders of which have the
right to vote with the members/partners/shareholders of the Practice on any
matter, (b) securities of the Practice convertible into equity interests in the
Practice, or (c) commitments, options, rights or warrants to issue any such
equity interests in the Practice, to issue securities of the Practice
convertible into such equity interests, or to redeem any securities of the
Practice. No interests of the Practice shall have been issued or disposed of in
violation of the preemptive rights, rights of first refusal or similar rights of
any of the Practice's members/partners/shareholders. The Practice shall quality
to do business as a foreign entity in any other state or jurisdiction by reason
of its business, properties or activities in or relating to such other state or
jurisdiction.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations
and minutes of thePractice and all amendments thereto of the Practice shall have
been delivered to Pentegra and shall be in form and substance satisfactory to
Pentegra. The minute books of the Practice shall contain all accurate minutes
of the meetings of and consents to actions taken without meetings of the
members\managers/partners/board of directors of the Practice since its
formation. The books of account of the Practice shall have been kept accurately
in the ordinary course of business and the revenues, expenses, assets and
liabilities of the Practice shall have been properly recorded in such books.
<PAGE>
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements and
other documents to be executed and delivered by it pursuant to this Agreement,
including without limitation, the Service Agreement and each Employment
Agreement or to be executed and delivered on the Closing Date, and has taken all
action required by law, its Organization/Partnership Agreement/Articles of
Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution,
delivery and performance of such documents. The Service Agreement, the
Employment Agreement and the other agreements contemplated hereby shall have
been duly executed and delivered by the Practice and constitute or will
constitute the legal, valid and binding obligations of the Practice enforceable
against the Practice in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of the Service Agreement, the Employment Agreements and
the other agreements contemplated hereby will not violate any provision of the
organizational documents of the Practice or any provisions of, or result in the
acceleration of, any obligation under any mortgage, lien, lease, agreement,
rent, instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any material
restrictions of any kind to which the Practice is subject, or result in any lien
or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and has filed with the
proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND DENTIST.
Pentegra and Dentist agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to
promptly prepare and file with the Securities Exchange Commission ("SEC") the
Registration Statement on Form S-1 (or other appropriate Form) to be filed by
Pentegra in connection with its Initial Public Offering (including the
prospectus constituting a part thereof, the "Registration Statement"). Pentegra
shall obtain all necessary state securities laws or "Blue Sky" permits and
approvals required to carry out the transactions contemplated by this Agreement
and the Dentist shall furnish all information concerning Dentist as may be
reasonable requested in connection with any such action.
<PAGE>
Dentist represents and warrants that none of the information or documents
supplied or to be supplied by it specifically for inclusion in the Registration
Statement, by exhibit or otherwise, will, at the time the Registration Statement
and each amendment or supplement thereto, if any, becomes effective under the
Securities Act of 1933, 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, in light of the circumstances under which they were
made, not misleading. Dentist shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.
Dentist shall furnish Pentegra will all information concerning itself and
such other matters as may be reasonable requested by Pentegra in connection with
the preparation of the Registration Statement and each amendment or supplement
thereto, or any other statement, filing, notice or application made by or on
behalf of each such party or any of its subsidiaries to any governmental entity
in connection with the transactions contemplated by the Other Agreements or this
Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at or
prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Dentist contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Dentist prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Dentist shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Dentist, the Business and the Assets, the results of which shall
be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service Agreement"),
in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which
Pentegra will provide management services to the Practice. Dentist shall have
executed and delivered a Guaranty Agreement in substantially the form attached
as EXHIBIT 4.10 of the Service Agreement pursuant to which Dentist shall, among
other things, guaranty the obligations of the Practice under the Service
Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her
employment agreement and executed an employment agreement ("Employment
Agreement") with the Practice in form and
<PAGE>
substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to
Dentist and Pentegra.
7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary
government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly
executed in form satisfactory to Pentegra and its counsel, referred to in
SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or
payables between Dentist and its affiliates and Dentist shall not have any
liabilities, including indebtedness, guaranties and capital leases, that are not
set forth on EXHIBIT 2.19.
7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured
on irs liability insurance program in accordance with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Dentist since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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.
At or prior to the date that the Registration Statement is declared effective by
the SEC, Pentegra shall have received all state securities and "Blue Sky"
permits necessary to consummate the transactions contemplated hereby. The
Pentegra Common Stock shall have been approved for listing on Nasdaq or other
exchange selected by Pentegra, subject only to official notification of
issuance.
SECTION 8. DENTIST'S CONDITIONS PRECEDENT.
The obligations of Dentist hereunder are subject to fulfillment at or prior
to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Pentegra contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly
executed in form satisfactory to Dentist and its counsel, referred to in SECTION
9.2.
8.5 SECURITIES APPROVAL. 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.
At or prior to the date that the Registration Statement is declared effective by
the SEC, Pentegra shall have received all
<PAGE>
state securities and "Blue Sky" permits necessary to consummate the
transactions contemplated hereby. The Pentegra Common Stock shall have been
approved for listing on Nasdaq or other exchange selected by Pentegra,
subject only to official notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF DENTIST. Within five business days after requested by
Pentegra, Dentist shall deliver to Pentegra the following, all of which shall be
in a form satisfactory to counsel to Pentegra and shall be held by Jackson &
Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an
escrow agreement or letter agreement in form and substance mutually acceptable
to the parties hereto:
(a) an executed original Service Agreement and executed originals of
all documents required by that agreement, including but not limited to the
Guaranty Agreemen and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a bill of sale conveying the Assets to Pentegra;
(d) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(e) certificates of Dentist dated as of the Closing Date, (i) as to
the truth and correctness of the representations and warranties of Dentist
contained herein; (ii) as to the performance of and compliance by Dentist with
all covenants contained herein; and (iii) certifying that all conditions
precedent of Dentist to the Closing have been satisfied;
(f) an opinion of counsel to Dentist opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Dentist, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Pentegra;
(g) non-foreign affidavits executed by Dentist;
(h) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(i) an executed Registration Rights Agreement between Pentegra and
Dentist, in substantially the form attached hereto as EXHIBIT 9.1(L) (the
"Registration Rights Agreement"); and
(j) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall
deliver to Dentist the following, all of which shall be in a form satisfactory
to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for
Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter
agreement in form and substance mutually acceptable to the parties hereto:
(a) the Acquisition Consideration;
<PAGE>
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance of
this Agreement and all related documents and agreements each certified by the
Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii) certifying
that all conditions precedent of Pentegra to the Closing have been satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and the
State of incorporation of Dentist;
(h) an opinion of counsel to Pentegra opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Pentegra, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Dentist;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Dentist to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in
any Exhibit attached hereto, any agreement executed pursuant hereto, and any
certificate executed and delivered by any party pursuant to the terms of this
Agreement, shall constitute representations and warranties of Dentist or of
Pentegra, as the case may be. All such representations and warranties, and all
representations and warranties expressly labeled as such in this Agreement shall
survive the date of this Agreement and the Closing Date for a period of five (5)
years following the Closing Date, except that (i) the representations and
warranties with respect to environmental and medical waste laws and health care
laws and matters shall survive for a period of fifteen (15) years and tax
representations shall survive until one year after the expiration of the
applicable statute of limitations. Each party covenants with the other parties
not to make any claim with respect to such representations and warranties,
against any party after the date on which such survival period shall terminate.
No party shall be entitled to claim indemnity from any other party pursuant to
SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice
required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party
hereby releases, acquits and discharges the other party from any and all claims
and demands, actions and causes of action, damages, costs, expenses and rights
of setoff with respect to which the notices required by SECTION 10.2, 10.3 or
10.4, as applicable, are not timely provided.
<PAGE>
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION
10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES
(INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL
THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY
PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF,
OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION
10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS
AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS
SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED
PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS,
DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT
LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING
FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S
<PAGE>
MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE
ASSETS, AND
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR AFTER
THE CLOSING DATE,
(D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE
FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING
FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY
PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR
AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION,
PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE
OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS
COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS,
THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the defense
of such action or proceeding, such Indemnified Person shall notify Indemnitor
thereof. If any such action or other proceeding shall be brought against any
Indemnified Person, Indemnitor shall, upon written notice given within a
reasonable time following receipt by Indemnitor of such notice from Indemnified
Person, be entitled
<PAGE>
to assume the defense of such action or proceeding with counsel chosen by
Indemnitor and reasonably satisfactory to Indemnified Person; provided,
however, that any Indemnified Person may at its own expense retain separate
counsel to participate in such defense. Notwithstanding the foregoing,
Indemnified Person shall have the right to employ separate counsel at
Indemnitor's expense and to control its own defense of such action or
proceeding if, in the reasonable opinion of counsel to such Indemnified
Person, (a) there are or may be legal defenses available to such Indemnified
Person or to other Indemnified Persons that are different from or additional
to those available to Indemnitor and which could not be adequately advanced
by counsel chosen by Indemnitor, or (b) a conflict or potential conflict
exists between Indemnitor and such Indemnified Person that would make such
separate representation advisable; provided, however, that in no event shall
Indemnitor be required to pay fees and expenses hereunder for more than one
firm of attorneys of Indemnified Person in any jurisdiction in any one action
or proceeding or group of related actions or proceedings. Indemnitor shall
not, without the prior written consent of any Indemnified Person, settle or
compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding to which such Indemnified Person is a
party unless such settlement, compromise or consent includes an unconditional
release of such Indemnified Person from all liability arising or potentially
arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Dentist giving rise to indemnification
under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset
the amount of damages incurred by it as a result of such breach of warranty,
representation, covenant or agreement against any amounts payable by Pentegra,
including the amounts payable under the Service Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Dentist
contained in this Agreement or in any certificate or other document executed and
delivered by Dentist pursuant to this Agreement is or becomes untrue or breached
in any material respect or if Dentist fails to comply in any material respect
with any covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
(c) at any time by Dentist if any representation or warranty of Pentegra
contained in this Agreement or in any certificate or other document executed and
delivered by Pentegra pursuant to this Agreement is or becomes untrue or
breached in any material respect or if Pentegra fails to comply in any material
respect with any covenant or agreement contained herein and such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra or Dentist if the transaction contemplated hereby shall
not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Dentist, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date,
Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber,
pledge, distribute, appoint or otherwise dispose of
<PAGE>
(i) any shares of Pentegra Common Stock received by such party hereunder,
(ii) any interest (including without limitation, an option to buy or sell) in
any shares of Pentegra Common Stock, in whole or in part, and no such
attempted transfer shall be treated as effective for any purpose or (b)
engage in any transaction, whether or not with respect to any shares of
Pentegra Common Stock or any interest therein, the intent or effect of which
is to reduce the risk of owning shares of Pentegra Common Stock. The
certificates evidencing the Pentegra Common Stock delivered to Dentist
pursuant to the terms hereof will bear a legend substantially in the form set
forth below and containing such other information as Pentegra may deem
necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the
shares of Pentegra Common Stock to be delivered to Dentist pursuant to this
Agreement have not been and will not be registered under the Securities Act of
1933 and may not be resold without compliance with the Securities Act of 1933.
The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement
is being acquired solely for its own account, for investment purposes only and
with no present intention of distributing, selling or otherwise disposing of it
in connection with a distribution. Dentist covenants, warrants and represents
that none of the shares of Pentegra Common Stock issued to it will be offered,
sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
except after full compliance with all of the applicable provisions of the
Securities Act, as amended, and the rules and regulations of the Securities
Exchange Commission and applicable state securities laws and regulations. All
certificates evidencing shares of Pentegra Common Stock shall bear the following
legend in addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Dentist resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic
risk of an investment in Pentegra Common Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and has such
knowledge and experience in financial and business matters that they are capable
of evaluating the merits and risks of the proposed investment and therefore have
the capacity to protect its own interests in connection with the acquisition of
the Pentegra Common Stock. Dentist and its representatives have had an adequate
opportunity to ask questions and receive answers from the officers of Pentegra
concerning any and all matters relating to the background and experience of the
officers and directors of Pentegra, the plans for the operations of the business
of Pentegra, and any plans for additional acquisitions and the like. Dentist
and its representatives have asked any and all questions in the nature described
in the preceding sentence and all questions have been answered to their
satisfaction. Dentist is an "accredited investors" as defined in Regulation D
of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes
and acknowledges that it had in the past, currently have, and in the future may
possibly have, access to certain confidential information of Pentegra that is
valuable, special and unique assets of Pentegra's businesses. Dentist agrees
that it will not
<PAGE>
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally
through no fault of Dentist, (ii) disclosure is required by law or the order
of any governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), Dentist shall, if
possible, give prior written notice thereof to the other parties hereto, and
provide such other parties hereto with the opportunity to contest such
disclosure, (iii) Dentist reasonably believes that such disclosure is
required in connection with the defense of a lawsuit against the disclosing
party, or (iv) Dentist is the sole and exclusive owner of such confidential
information as a result of the transactions contemplated hereunder or
otherwise. In the event of a breach or threatened breach by Dentist of the
provisions of this SECTION 13, Pentegra shall be entitled to an injunction
restraining Dentist from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting Pentegra from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages. The obligations of the parties under this
SECTION 13 shall survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement, together with the transactions contemplated by the Other
Agreement and the Initial Public Offering, will qualify as an exchange meeting
the requirements of Section 351 of the Code. The tax returns (and schedules
thereto) of Dentist and Pentegra shall be filed in a manner consistent with
such intention and Dentist and Pentegra shall each provide the other with such
tax information, reports, returns or schedules as may be reasonably required to
assist the other in so reporting the transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery, or by
facsimile AND overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Dentist:
To address set forth on EXHIBIT 14.2
with a copy to:
<PAGE>
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this Agreement,
whether or not such transactions are consummated. Without limiting the
generality of the foregoing and whether or not such liabilities may be deemed to
have been incurred in the ordinary course of business, Pentegra shall not be
liable to or required to pay, either directly or indirectly, any fees and
expenses of legal counsel, accountants, auditors or other persons or entities
retained by Dentist for services rendered in connection with negotiating and
closing the transactions contemplated by this Agreement or the documents to be
executed in connection herewith, whether or not such costs or expenses are
incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure, either
written or oral, regarding the transactions contemplated by this Agreement
without the prior written consent of the other party, provided that the
foregoing shall not prohibit any disclosure (a) by press release, filing or
otherwise that Pentegra has determined in good faith judgment to be required by
Federal securities laws or the rules of the National Association of Securities
Dealers, (b) to attorneys, accountants, investment bankers or other agents of
the parties assisting the parties in connection with the transactions
contemplated by this Agreement, and (c) by Pentegra in connection with the
conduct of its Initial Public Offering and conducting an examination of the
operations and assets of Dentist.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are
integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and not
only in connection with the specific representation in which they are explicitly
referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS
ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY
AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR
ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one and the same
instrument.
<PAGE>
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any entity
that, through one or more intermediaries is, controlled, controlled by or under
common control with, Pentegra. Upon any such assignment prior to the Closing,
all references herein to Pentegra (including those to Pentegra Common Stock)
shall be deemed to include references to the assignee and the assignee's common
stock. Notwithstanding any such assignment, Pentegra shall not, absent a
written release from Dentist, be relieved from its obligations to Dentist under
this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Dentist, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and pro-
rated among Dentist and Pentegra as of the Closing Date, and the prorated amount
due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes and
shall pay Dentist or may demand from Dentist, and Dentist agrees to pay, the
amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing, and
signed by the parties hereto. The waiver of any of the terms and conditions of
this Agreement shall not be construed as a waiver of any other terms and
conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist
(hereinafter referred to as a "Party"), whether made before or after the
institution of any legal proceeding, any dispute among the parties hereto in
any way arising out of, related to, or in connection with this Agreement
(hereinafter a "Dispute"), shall be resolved by binding arbitration in
accordance with the terms of this Section (hereinafter the "Arbitration
Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in accordance
with the terms of this Arbitration Program, the Commercial Arbitration Rules of
the AAA. In the event of any inconsistency between this Arbitration Program and
those rules or statutes, then the terms of this Arbitration Program shall
control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been completed
and the arbitrators have determined each party's post-arbitration obligations
and responsibilities as it relates to such warranties and covenants. No
provision of, nor the exercise of any rights under, this Arbitration Program
shall limit the right of any Party at any time to seek or use ancillary or
preliminary judicial or non-judicial self help remedies for the purposes of
obtaining, perfecting, preserving, or foreclosing upon any personal property in
which there has been granted a security interest or lien by a Party in the
Documents. In Disputes involving indebtedness or other monetary obligations,
each Party agrees that the other
<PAGE>
Party may proceed against all liable persons, jointly and severally against
one or more of them, without impairing rights against other liable persons.
Nor shall a Party be required to join the principal obligor or any other
liable persons (e.g., sureties or guarantors) in any proceeding against a
particular person. A Party may release or settle with one or more liable
persons as the Party deems fit without releasing or impairing rights to
proceed against any persons not so released. All statutes of limitation that
would otherwise be applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing, of
that Party's desire to arbitrate a dispute; and each Party shall, within twenty
(20) days from the date such notification is received, select an arbitrator, and
those two arbitrators shall select a third arbitrator within ten (10) days
thereafter. The issues or claims in dispute shall be committed to writing,
separately stated and numbered, and each party's proposed answers or contentions
shall be signed below the questions. Failure by a party to select an arbitrator
within the prescribed time period shall serve as that Party's acquiescence and
acceptance of the other party's selection of arbitrator. The arbitrators shall
resolve all Disputes in accordance with the applicable substantive law. Any
Dispute shall be decided by a majority vote of three arbitrators, unless the
claim or amount in controversy does not exceed $100,000.00, in which case a
single arbitrator (who shall have authority to render a maximum award of
$100,000.00, including all damages of any kind, costs and fees) may decide the
Dispute. The arbitrators may grant any remedy or relief that the arbitrators
deem just and equitable and within the scope of this Arbitration Program. The
arbitrators may also grant such ancillary relief as is necessary to make
effective the award. In all arbitration proceedings the arbitrators shall make
specific and written findings of fact and conclusions of law. In all
arbitration proceedings in which the amount in controversy exceeds $100,000.00,
in the aggregate, the Parties shall have in addition to the statutory right to
seek vacation or modification of any award pursuant to applicable law, the right
to seek vacation or modification of any award that is based in whole, or in
part, on an incorrect or erroneous ruling of law by appeal to an appropriate
court having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must be
filed in a court having jurisdiction over the Dispute within 15 days from the
date the award in rendered. The arbitrators' findings of fact shall be binding
on all Parties and shall not be subject to further review except as otherwise
allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in writing
by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the
headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this
Arbitration Program shall survive any termination, amendment, or expiration of
the Documents, unless the Parties otherwise expressly agree in writing making
specific reference to this Arbitration Program. To the extent permitted by
applicable law, the arbitrator shall have the power to award recovery of all
costs and fees (including attorney's fees, administrative fees, and arbitrators'
fees) to the prevailing Party. This Arbitration Program may be amended,
changed, or modified only by a writing which specifically refers to this
Arbitration Program and which is signed by all the Parties. If any term,
covenant, condition or provision of the Arbitration Program is found to be
unlawful or invalid or unenforceable, such illegality or invalidity or
unenforceable shall not affect the legality, validity or enforceability of the
remaining parts of this Arbitration Program, and all such remaining parts hereof
shall be valid and enforceable and have full force and effect as if the illegal,
invalid or unenforceable part had not been included. Each Party agrees to keep
all Disputes and arbitration proceedings strictly confidential, except for
disclosures of information required in the ordinary course of business of the
Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be found
to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect. In lieu of such
provision, there shall be added automatically as part of this Agreement, a
provision as similar in its terms to such provision as may be possible and be
legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
----------------------------------
Its: Senior Vice President
---------------------------------
/s/ Richard H. Fettig, D.D.S.
-------------------------------------
Richard H. Fettig, D.D.S.
<PAGE>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 [intentionally omitted]
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
ALAN H. GERBHOLZ, D.D.S., P.C.,
and
THE AMG TRUST
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND
SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . 3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . 8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Section 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . 10
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . 12
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . 12
Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . 13
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . 13
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . 13
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . 13
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . 13
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . 14
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . 14
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . 16
10.2 INDEMNIFICATION BY PENTEGRA. . . . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . . 17
10.4 INDEMNIFICATION PROCEDURE. . . . . . . . . . . . . . . . . . . . . . 18
10.5 RIGHT OF SETOFF. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . 19
12.2 INVESTMENTS; COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION. . . . . . . . . . . . . . . . . . . . 20
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . 21
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . 22
14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . 22
14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . 22
14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed
effective August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra"), ALAN H. GERBHOLZ, D.D.S., P.C., a Colorado
professional corporation ("Contributor") and THE AMG TRUST, shareholder of
Contributor (referred to herein as "Shareholder" or "Shareholders").
WITNESSETH:
WHEREAS, Contributor operates a dental practice ("Business") and Pentegra
is engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra
desires to receive from Contributor, certain assets of Contributor;
WHEREAS, Pentegra or its affiliated designee has entered into or intends to
enter into Agreements and Plans of Reorganization, Asset Contribution Agreements
and other acquisition agreements (collectively, the "Other Agreements") with
such persons or entities or the stockholders of such entities listed on EXHIBIT
A (together with Contributor, the "Target Companies");
WHEREAS, it is intended for Federal income tax purposes that the transfers
contemplated by this Agreement, the Other Agreements and Pentegra's initial
public offering ("Initial Public Offering") of shares of its common stock, par
value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange
within the meaning of Section 351 of the Internal Revenue Code of 1986, as
amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock
is consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions
contained herein, on the Closing Date, Contributor shall convey, transfer,
deliver and assign to Pentegra or any affiliate of Pentegra designated by
Pentegra all of Contributor's right, title and interest in and to those certain
assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and
collectively "Assets"), free and clear of all obligations, security interests,
claims, liens and encumbrances, except as specifically assumed, or taken subject
to, by Pentegra pursuant to SECTION 1.3(b) hereof.
<PAGE>
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and contributed hereunder, and Contributor shall retain all of its
right, title and interest in and to, the assets not specifically transferred
hereunder, including without limitation, the assets described on EXHIBIT 1.2
(the "Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Contributor
contained herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Contributor the consideration
specified in ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Contributor listed on EXHIBIT
1.3(b) attached hereto to the extent that such obligations, commitments,
liabilities and indebtedness are current and not otherwise in default. (the
"Assumed Liabilities"). Notwithstanding any contrary provision contained
herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume:
(i) any liability, commitment or obligation or trade payable or indebtedness not
specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on
EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under
such contracts, leases, commitments or obligations which occurred on or before
the Closing Date; (iii) any liability for any employee benefits payable to
employees of Contributor, including, but not limited to, liabilities arising
under any Contributor Plan (as defined in SECTION 2.21 hereof); (iv) any
liability based upon or arising out of a violation of any antitrust or similar
restraint-of-trade laws by any Shareholder or Contributor, including, without
limiting the generality of the foregoing, any such antitrust liability which may
arise in connection with agreements, contracts, commitments or orders for the
sale of goods or provision of services by Contributor reflected on the books of
Contributor at or prior to the Closing Date; (v) any liability based upon or
arising out of any tortious or wrongful actions of Contributor, any licensed
professional employee or independent contractor of Contributor or any
Shareholder, (vi) any liability for the payment of any taxes of Contributor or
any Shareholder, including without limitation, sales, use and other transfer
taxes and income taxes arising from or by reason of the transactions
contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust
or mortgages on real property; nor (viii) any liability incurred or to be
incurred pursuant to any malpractice or other suits or actions pending against
Contributor or any Shareholder.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement,
Contributor and Shareholders shall execute and deliver all such deeds, bills of
sale, assignments and assurances and take and do all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under the Assets in Pentegra or otherwise
to carry out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS.
Contributor and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Contributor is a professional
corporation or association, as applicable, duly organized, validly existing and
in good standing under the laws of the State of
<PAGE>
Colorado. Contributor has all necessary corporate powers to own all of its
assets and to carry on its business as such business is now being conducted.
Contributor does not own stock in or control, directly or indirectly, any
other corporation, association or business organization, nor is Contributor a
party to any joint venture or partnership. The Shareholders are the sole
shareholders of Contributor and own all outstanding shares of capital stock
free of all security interests, claims, encumbrances and liens in the amounts
set forth on EXHIBIT 2.1. Each share of Contributor's common stock has been
legally and validly issued and fully paid and nonassessable. No shares of
capital stock of Contributor are owned by Contributor in treasury. There are
no outstanding (a) bonds, debentures, notes or other obligations the holders
of which have the right to vote with the stockholders of Contributor on any
matter, (b) securities of Contributor convertible into equity interests in
Contributor, or (c) commitments, options, rights or warrants to issue any such
equity interests in Contributor, to issue securities of Contributor
convertible into such equity interests, or to redeem any securities of
Contributor. No shares of capital stock of Contributor have been issued or
disposed of in violation of the preemptive rights, rights of first refusal or
similar rights of any of Contributor's stockholders. Contributor is not
required to qualify to do business as a foreign corporation in any other state
or jurisdiction by reason of its business, properties or activities in or
relating to such other state or jurisdiction. Contributor does not have any
assets, employees or offices in any state other than the state set forth in
the first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the corporate
power to execute, deliver and perform this Agreement and all agreements and
other documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all action required by
law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to
authorize the execution, delivery and performance of this Agreement and such
related documents. Each Shareholder has the legal capacity to enter into and
perform this Agreement and the other agreements to be executed and delivered in
connection herewith. Contributor has obtained the approval of its stockholders
necessary to the consummation of the transactions contemplated herein. This
Agreement and all agreements and documents executed and delivered in connection
herewith have been, or will be as of the Closing Date, duly executed and
delivered by Contributor and Shareholders, as appropriate, and constitute or
will constitute the legal, valid and binding obligations of Contributor and
Shareholders, enforceable against Contributor and Shareholders in accordance
with their respective terms, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies. The execution and delivery of this
Agreement, and the agreements executed and delivered pursuant to this Agreement
or to be executed and delivered on the Closing Date, do not, and, subject to the
receipt of consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, violate any provision of the Articles or
Certificate of Incorporation or Bylaws of Contributor or any provisions of, or
result in the acceleration of, any obligation under any mortgage, lien, lease,
agreement, rent, instrument, order, arbitration award, judgment or decree to
which Contributor or any Shareholder is a party or by which Contributor or any
Shareholder is bound, or violate any material restrictions of any kind to which
Contributor is subject, or result in any lien or encumbrance on any of
Contributor's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets, or
waivers thereof, have been duly obtained and are in full force and effect and
are described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Contributor and Shareholders, threatened, which may result in the
revocation, cancellation or suspension, or any adverse modification, of any such
licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Contributor or
<PAGE>
Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been declared or paid by Contributor on any of its capital stock
since the Balance Sheet Date. No repurchase of any of Contributor's capital
stock has been approved, effected or is pending, or is contemplated by
Contributor.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Contributor and all
amendments thereto have been delivered to Pentegra. The minute books of
Contributor contain accurate minutes of all meetings of and consents to actions
taken without meetings of the Board of Directors and stockholders of Contributor
since its formation. The books of account of Contributor have been kept
accurately in the ordinary course of business and the revenues, expenses, assets
and liabilities of Contributor have been properly recorded in such books.
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore
furnished Pentegra with copies of its unaudited balance sheet and related
unaudited statements of income, retained earnings and cash flows for its prior
two full fiscal years, as well as copies of its unaudited balance sheet as of
December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the
latest date thereof shall be referred to as the "Balance Sheet Date") and any
related unaudited statements of income, retained earnings, schedule of accounts
receivable, accounts payable and accrued liabilities, and cash flows for the
twelve months then ended (collectively, with the related notes thereto, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and results of operations of Contributor as of the dates and for the
periods indicated and reflect all fixed and contingent liabilities of
Contributor.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Contributor or any Shareholder leases, as lessor or lessee,
real or personal property used in operating the Business, related to the Assets
or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable
in accordance with their respective terms, and there is not under any such lease
any existing default by Contributor, as lessor or lessee, or any condition or
event of which any Shareholder or Contributor has knowledge which with notice or
lapse of time, or both, would constitute a default, in respect of which
Contributor or Shareholders have not taken adequate steps to cure such default
or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Contributor and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good, valid
and marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all encumbrances
set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to the Closing Date and evidence of
such releases of liens and claims shall be provided to Pentegra on the Closing
Date and the Assets shall not be used to satisfy such liens, claims or
encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned or
used by Contributor, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Contributor has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT
2.12 is a listing of all names of all
<PAGE>
predecessor companies of Contributor, including the names of any entities from
whom Contributor previously acquired significant assets. Except for
off-the-shelf software licenses and except as set forth on EXHIBIT 2.12,
Contributor is not a licensee in respect of any patents, trademarks, service
marks, trade names, copyrights or applications therefor, or manufacturing
processes, formulas or trade secrets or similar items and no such licenses are
necessary for the conduct of the Business or the use of the Assets. No claim
is pending or has been made to the effect that the Assets or the present or
past operations of Contributor in connection with the Assets or Business
infringe upon or conflict with the asserted rights of others to any patents,
patent rights, manufacturing processes, trade names, trademarks, service
marks, inventions, licenses, specialized treatment protocols, copyrights,
formulas, know-how and trade secrets. Contributor has the sole and exclusive
right to use all Assets constituting proprietary rights without infringing or
violating the rights of any third parties and no consents of any third parties
are required for the use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on
EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this
Agreement of: (a) the name of each director and officer of Contributor and the
offices held by each, (b) the most recent payroll report of Contributor, showing
all current employees of Contributor and their current levels of compensation,
(c) promised increases in compensation of employees of Contributor that have not
yet been effected, (d) oral or written employment agreements, consulting
agreements or independent contractor agreements (and all amendments thereto) to
which Contributor is a party, copies of which have been delivered to Pentegra,
and (e) all employee manuals, materials, policies, procedures and work-related
rules, copies of which have been delivered to Pentegra. Contributor is in
compliance with all applicable laws, rules, regulations and ordinances
respecting employment and employment practices. Contributor has not engaged in
any unfair labor practice. There are no unfair labor practices charges or
complaints pending or threatened against Contributor, and Contributor has never
been a party to any agreement with any union, labor organization or collective
bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Contributor nor the
Business nor any of the Assets is subject to any pending, nor does Contributor
or any Shareholder have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Contributor, any Shareholder, the Business, the Assets or the
transactions contemplated by this Agreement, and, to the knowledge of
Contributor and Shareholders, no basis for any such action exists, nor is there
any legal impediment of which Contributor or any Shareholder has knowledge to
the continued operation of its business or the use of the Assets in the ordinary
course, subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts, obligations
and commitments of Contributor ("Contracts"), entered into in connection with
and related to the Assets or the Business, all of which are listed or
incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13
(in the case of employment agreements) and EXHIBIT 2.15 (in the case of
Contracts other than leases) attached hereto. Except as otherwise indicated on
such Exhibits, all of such Contracts are valid, binding and enforceable in
accordance with their terms and are in full force and effect, and no defenses,
offsets or counterclaims have been asserted or may be made by any party thereto.
Except as indicated on such Exhibits, there is not under any such Contract any
existing default by Contributor or any Shareholder, or any condition or event of
which Contributor or any Shareholder has knowledge which with notice or lapse of
time, or both, would constitute a default. Contributor and Shareholders have
no knowledge of any default by any other party to such Contracts. Contributor
and Shareholders have not received notice of the intention of any party to any
Contract to cancel or terminate any Contract and have no reason to believe that
any amendment or change to any Contract is contemplated by any party thereto.
Other than those contracts, obligations and commitments listed on EXHIBIT 2.8,
EXHIBIT 2.13 and EXHIBIT 2.15, Contributor are not a party to any material
written or oral agreement contract, lease or arrangement, including without
limitation, any:
(a) Contract related to the Assets other than this Agreement;
<PAGE>
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product or
service;
(h) Loan agreement or other contract for money borrowed or lent or to
be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of the
Contributor or Shareholders, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Contributor on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16,
Contributor has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) or entered into any contract, lease, license or
commitment, except in connection with the performance of this Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued, contingent
or otherwise) other than (i) liabilities shown or reflected on the Balance
Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary
course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(d) Made any payments to or loaned any money to any person or entity
other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have been
required due to income or operations of Contributor since the Balance Sheet
Date;
<PAGE>
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants or
agents, or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of any officer, employee, consultant or agent;
(j) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties, assets
or business or the Business or the Assets, or experienced any other material
adverse change in its financial condition, assets, prospects, liabilities or
business;
(n) Declared or paid a distribution, payment or dividend of any kind
on the capital stock of Contributor;
(o) Repurchased, approved any repurchase or agreed to repurchase any
of Contributor's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Contributor has filed all tax returns (including tax
reports and other statements) required to have been filed by it, and has paid
all taxes (including any interest, penalty or additions thereto) required to
have been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Contributor has not received any notice that any tax deficiency or
delinquency has been or may be asserted against Contributor. There are no
audits relating to taxes of Contributor pending or in process or, to the
knowledge of Contributor, threatened. Contributor is not currently the
beneficiary of any waiver of any statute of limitations in respect of taxes nor
of any extension of time within which to file any tax return or to pay any tax
assessment or deficiency. There are no liens or encumbrances relating to taxes
on or threatened against any of the assets of Contributor. Contributor has
withheld and paid all taxes required by law to have been withheld and paid by
it. Neither Contributor nor any predecessor of Contributor is or has been a
party to any tax allocation or sharing agreement or a member of an affiliated
group of corporations filing a consolidated Federal income tax return.
Contributor has delivered to Pentegra correct and complete copies of
Contributor's three most recently filed annual state, local and Federal income
tax returns, together with all examination reports and statements of
deficiencies assessed against or agreed to by Contributor during the three
calendar year period preceding the date of this Agreement. Contributor has
neither made any payments, is obligated to make any payments, or is a party to
any agreement that under any circumstance could obligate it to make any payments
that will not be deductible under Code section 280G.
<PAGE>
(b) Contributor does not intend to dispose of any of the shares of
Pentegra Common Stock to be received hereunder and is not a party to any plan,
arrangement or agreement for the disposition of such shares. Contributor and
Shareholders have no knowledge, after due inquiry, of any such intent, plan,
arrangement or agreement by any Shareholder. Nothing contained herein shall
prohibit Contributor from selling such shares of Pentegra Common Stock after the
designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated by
this Agreement which may be now or hereafter asserted against Pentegra,
Contributor or Contributor's shareholders resulting from any action taken by
Contributor or any Shareholder or their respective agents or employees, or any
of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Contributor did not have, as of the Balance Sheet
Date, and has not incurred since that date and will not have incurred as of the
Closing Date, any liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, other than
those incurred in the ordinary course of business or as set forth on EXHIBIT
2.16. Contributor and Shareholders do not know, or have reasonable grounds to
know, of any basis for the assertion against Contributor or any Shareholder as
of the Balance Sheet Date, of any claim or liability of any nature in any amount
not fully reflected or reserved against on the Balance Sheet, or of any claim or
liability of any nature arising since that date other than those incurred in the
ordinary course of business or contemplated by this Agreement. All indebtedness
of Contributor (including without limitation, indebtedness for borrowed money,
guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached
hereto.
2.20 INSURANCE POLICIES. Contributor, each Shareholder and each licensed
professional of Contributor carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the industry.
Valid and enforceable policies in such amounts are outstanding and duly in force
and will remain duly in force through the Closing Date. All such policies are
described in EXHIBIT 2.20 attached hereto and true and correct copies have been
delivered to Pentegra. Neither Shareholders nor Contributor have not received
notice or other communication from the issuer of any such insurance policy
cancelling or amending such policy or threatening to do so. Neither
Contributor, nor any Shareholder nor any licensed professional employee of
Contributor has any outstanding claims, settlements or premiums owed against any
insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached
hereto, Contributor has neither established, nor maintains, nor is obligated to
make contributions to or under or otherwise participate in, (a) any bonus or
other type of compensation or employment plan, program, agreement, policy,
commitment, contract or arrangement (whether or not set forth in a written
document); (b) any pension, profit-sharing, retirement or other plan, program or
arrangement; or (c) any other employee benefit plan, fund or program, including,
but not limited to, those described in SECTION 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). All such plans listed on
EXHIBIT 2.20 (individually "Contributor Plan," and collectively "Contributor
Plans") have been operated and administered in all material respects in
accordance with all applicable laws, rules and regulations, including without
limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of
the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended,
the Age Discrimination in Employment Act of 1967, as amended, and the related
rules and regulations adopted by those Federal agencies responsible for the
administration of such laws. No act or failure to act by Contributor has
resulted in a "prohibited transaction" (as defined in ERISA) with respect to the
Contributor Plans. No "reportable event" (as defined in ERISA) has occurred
with respect to any of the Contributor Plans. Contributor has not previously
made, is not currently making, and is not obligated in any way to make, any
contributions to any multiemployer plan within the meaning of the Multi-Employer
Pension Plan Amendments Act of 1980. With respect to each Contributor Plan,
either (i) the value of plan assets
<PAGE>
(including commitments under insurance contracts) is at least equal to the
value of plan liabilities or (ii) the value of plan liabilities in excess of
plan assets is disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any charter
or other corporate restriction or any judgment, order, writ, injunction, decree,
rule or regulation that materially and adversely affects the condition
(financial or otherwise), operations, assets, liabilities, business or prospects
of Contributor, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Shareholders and
Contributor's licensed professional employees, and the conduct of the Business
and use of the Assets, have complied with all applicable laws, rules,
regulations and licensing requirements, including, without limitation, the
Federal Environmental Protection Act, the Occupational Safety and Health Act,
the Americans with Disabilities Act and any environmental laws and medical waste
laws, and there exist no violations by Contributor, any Shareholder or any
licensed professional employee of Contributor of any Federal, state or local law
or regulation. Contributor and Shareholders have not received any notice of a
violation of any Federal, state and local laws, regulations and ordinances
relating to the operations of the Business and Assets and no notice of any
pending inspection or violation of any such law, regulation or ordinance has
been received by Contributor.
2.24 THIRD PARTY PAYORS. Contributor, Shareholders and each licensed
professional employee or independent contractor of Contributor has timely filed
all claims or other reports required to be filed with respect to the purchase of
services by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are no
pending appeals, overpayment determinations, adjustments, challenges, audit,
litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Contributor, any
Shareholder and each licensed professional employee of Contributor. Neither
Contributor, nor any Shareholder, nor any licensed professional employee of
Contributor has been convicted of, or pled guilty or nolo contendere to, patient
abuse or negligence, or any other Medicare or Medicaid program related offense
and none has committed any offense which may serve as the basis for suspension
or exclusion from the Medicare and Medicaid programs or any other third party
payor program. With respect to payors, Contributor, Shareholders and
Contributor's licensed professional employees has not (a) knowingly and
willfully making or causing to be made a false statement or representation of a
material fact in any application for any benefit or payment; (b) knowingly and
willfully making or causing to be made any false statement or representation of
a material fact for use in determining rights to any benefit or payment; (c)
failed to disclose knowledge of the occurrence of any event affecting the
initial or continued right to any benefit or payment on its own behalf or on
behalf of another, with the intent to fraudulently secure such benefit or
payment; and (d) violated any applicable state anti-remuneration or self-
referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Contributor or Shareholders in this Agreement, and no Exhibit or certificate
issued or executed by, or information furnished by, officers or directors of
Contributor or any Shareholder and furnished or to be furnished to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Contributor has with any bank or other
financial institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director
<PAGE>
or stockholder of Contributor, or their respective spouses, children or
affiliates, owns directly or indirectly, on an individual or joint basis, any
interest in, has a compensation or other financial arrangement with, or serves
as an officer or director of, any customer or supplier or competitor of
Contributor or any organization that has a material contract or arrangement
with Contributor.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of
the names and addresses of each payor of Contributor's services which accounted
for more than 10% of revenues of Contributor in the preceding fiscal year.
Contributor has good relations with all such payors and other material payors of
Contributor and none of such payors has notified Contributor that it intends to
discontinue its relationship with Contributor or to deny any claims submitted to
such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Contributor and Shareholders as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions required
by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize
the execution, delivery and performance of this Agreement and such related
documents. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing Date,
duly executed and delivered by Pentegra and constitute or will constitute the
legal, valid and binding obligations of Pentegra, enforceable against Pentegra
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and delivery
of this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and, the
consummation of the actions contemplated hereby will not, violate any provision
of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or decree
to which Pentegra is a party or by which Pentegra is bound, or violate any
material restrictions of any kind to which Pentegra is subject, or result in any
lien or encumbrance on any of Pentegra's assets. Other than as have been
obtained or as would not have a material adverse effect, there are no consents
of any person or entity required for the transaction contemplated hereby on
behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would not
have a material adverse effect, there are no proceedings pending or, to the
knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses or
permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any pending,
nor does Pentegra have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Pentegra, its business, assets or the transactions contemplated by
this Agreement, and, to the knowledge of Pentegra, no basis for any such action
exists, nor is there any legal impediment of which Pentegra has
<PAGE>
knowledge to the continued operation of its business or the use of its Assets
in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports and
other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it, other than as would not have a material adverse effect. Pentegra
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Pentegra. There are no audits relating to taxes of
Pentegra pending or in process or, to the knowledge of Pentegra, threatened.
Pentegra is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra
in this Agreement, and no Exhibit or certificate issued by officers or directors
of Pentegra and furnished or to be furnished to Contributor or any Shareholder
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
SECTION 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS.
Contributor and Shareholders, jointly and severally, agree that between the
date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Shareholders
shall use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Contributor
and Shareholders agree to complete the Exhibits hereto to be provided by them in
form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Contributor and Shareholders shall operate the
Business and use the Assets in the ordinary course. Contributor and
Shareholders shall not enter into any lease, contract, indebtedness, commitment,
purchase or sale or acquire or dispose of any capital asset relating to the
Business or the Assets except in the ordinary course of business. Contributor
and Shareholders shall use their best efforts to preserve the Business and
Assets intact and shall not take any action that would have an adverse effect on
the Business or Assets. Contributor and Shareholders shall use their best
efforts to preserve intact the relationships with payors, customers, suppliers,
patients and others having significant business relations with Contributor.
Contributor and Shareholders shall collect its receivables and pay its trade
payables in the ordinary course of business. Contributor and Shareholdes shall
not introduce any new method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Contributor and Shareholders shall permit
Pentegra and its authorized representatives access to, and make available for
inspection, all of the assets and business of Contributor, the Business and the
Assets, including employees, customers and suppliers and permit Pentegra and its
authorized
<PAGE>
representatives to inspect and make copies of all documents, records and
information with respect to the business or assets of Contributor, the
Business or the Assets as Pentegra or its representatives may request.
Contributor and Shareholders shall promptly notify Pentegra in writing of (a)
any notice or communication relating to a default or event that, with notice
or lapse of time or both, could become a default, under any contract,
commitment or obligation to which Contributor is a party or relating to the
Business or the Assets, and (b) any adverse change in Contributor's or the
Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor and
Shareholders shall use their best efforts to secure all necessary approvals and
consents of third parties to the consummation of the transactions contemplated
hereby, including consents described on EXHIBIT 2.4. Contributor and
Shareholders shall use their best efforts to obtain all licenses, permits,
approvals or other authorizations required under any law, rule, regulation, or
otherwise to provide the services of Contributor contemplated by the Service
Agreement and to conduct the intended business of Contributor and operate the
Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance with
the provisions hereof, Contributor and Shareholders shall not, and shall use its
best efforts to cause Contributor's employees, agents and representatives not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer, including without limitation,
any proposal or offer to any Shareholder, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of Contributor or
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to such proposal
or offer, and Contributor and Shareholders will immediately cease any such
activities, discussions or negotiations heretofore conducted with respect to any
of the foregoing. Contributor and Shareholders shall immediately notify
Pentegra if any such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby covenants
and agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Contributor or any entity might have any liability whatsoever
arising from any insurance, pension plan, employment tax or similar liability
of Contributor to any employee or other person or entity (including, without
limitation, any Contributor Plan and any liability under employment contracts
with Contributor) allocable to services performed prior to the Closing Date.
Contributor and Shareholders acknowledge that the purpose and intent of this
covenant is to assure that Pentegra shall have no unfunded liability whatsoever
at any time after the Closing Date with respect to any of Contributor's
employees or similar persons or entities, including, without limitation, any
Contributor Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of any Shareholder (other than in the ordinary course of business) or other
employee or an independent contractor of Contributor, adopt, amend or terminate
any compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect upon Contributor, its business, assets or
prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Contributor, nor will any repurchase of
any of Contributor's capital stock be approved or effected.
<PAGE>
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Shareholders
shall use their best efforts to take, or cause to be taken, all actions
necessary to effect the acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Contributor and Shareholders will not
change in any material respect the tax or financial accounting methods or
practices followed by Contributor (including any material change in any
assumption underlying, or any method of calculating, any bad debt, contingency
or other reserve), except as may be required by law or generally accepted
accounting principles. Contributor and Shareholders will duly, accurately and
timely (without regard to any extensions of time) file all returns, information
statements and other documents relating to taxes of Contributor required to be
filed by it, and pay all taxes required to be paid by it, on or before the
Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Contributor hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Contributor and Shareholders covenant and agree that all of the
creditors with respect to the Business and the Assets will be paid in full by
Contributor prior to the Closing Date, except to extent that any liability to
such creditors is assumed by Pentegra pursuant to this Agreement. If required
by Pentegra, Contributor and Shareholders shall furnish Pentegra with proof of
payment of all creditors with respect to the Business and the Assets.
Notwithstanding the foregoing, Contributor and Shareholders may dispute the
validity or amount of any such creditor's claim without being deemed to be in
violation of this SECTION 4.11, provided that such dispute is in good faith and
does not unreasonably delay the resolution of the claim and provided, further
that Contributor and Shareholders agree to indemnify and bond Pentegra for such
amounts as is satisfactory to Pentegra.
4.12 LEASE. If Contributor leases any of its premises from any
Shareholder or other affiliate of Contributor or any shareholder of Contributor,
Pentegra shall have entered into a building lease (the "Building Lease") with
the owner of such premises on terms and conditions satisfactory to Pentegra, the
terms and conditions of which shall include, without limitation, (i) a five year
initial term plus three five-year renewal options, (ii) a lease rate equal to
the fair market value lease rate, as agreed to by Pentegra, and (iii) such other
provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Contributor and Shareholders shall cooperate
with all requests made by Pentegra for the purpose of allowing Pentegra to hire
those non-dental employees of Contributor designated by Pentegra, such
employment to be effective as of the Closing Date. Notwithstanding the above,
Contributor and Shareholders shall remain liable under any Contributor Plans for
any claims incurred by any employees or their spouses or dependents, and for all
compensation, bonuses, benefits and other such items and other liabilities
related to Contributor's employees incurred by Contributor prior to the Closing
Date.
4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges that all
employees of Contributor hired by Pentegra pursuant to SECTION 4.13 above,
shall be treated as "leased employees" (as defined in Code Section 414(n)) of
Contributor and shall be treated as Clinic employees for purposes of eligibility
and participation in Contributor Plans.
4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective as
of the Closing Date.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions.
<PAGE>
Pentegra agrees to complete the Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS.
Pentegra, Shareholders and Contributor agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Contributor and Shareholders
shall cooperate to promptly prepare and file with the Securities Exchange
Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate
Form) to be filed by Pentegra in connection with its Initial Public Offering
(including the prospectus constituting a part thereof, the "Registration
Statement"). Pentegra shall obtain all necessary state securities laws or "Blue
Sky" permits and approvals required to carry out the transactions contemplated
by this Agreement and the Contributor and Shareholders shall furnish all
information concerning Contributor and Shareholders as may be reasonable
requested in connection with any such action.
Contributor and Shareholder represent and warrant that none of the
information or documents supplied or to be supplied by it specifically for
inclusion in the Registration Statement, by exhibit or otherwise, will, at the
time the Registration Statement and each amendment or supplement thereto, if
any, becomes effective under the Securities Act of 1933, 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, in light of the
circumstances under which they were made, not misleading. Contributor and
Shareholders shall be entitled to review the Registration Statement and each
amendment thereto, if any, prior to the time each becomes effective under the
Securities Act of 1933.
Contributor and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by Pentegra
in connection with the preparation of the Registration Statement and each
amendment or supplement thereto, or any other statement, filing, notice or
application made by or on behalf of each such party or any of its subsidiaries
to any governmental entity in connection with the transactions contemplated by
the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at or
prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Contributor and Shareholders contained herein shall have been true and
correct in all respects when initially made and shall be true and correct in all
respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Contributor and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Contributor and Shareholders
prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
<PAGE>
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Contributor shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Contributor, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and Pentegra
shall have executed and delivered a Service Agreement (the "Service Agreement"),
in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which
Pentegra will provide management services to the Contributor. Each Shareholder
shall have executed and delivered a Guaranty Agreement in substantially the form
attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder
shall, among other things, guaranty the obligations of Contributor under the
Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated, and
caused each shareholder of Contributor that has an existing employment agreement
with Contributor to have terminated his or her employment agreement with
Contributor and shall have executed an employment agreement ("Employment
Agreement") with Contributor in form and substance attached hereto as EXHIBIT
7.8 and otherwise satisfactory to Contributor and Pentegra.
7.9 CONSENTS AND APPROVALS. Contributor and Shareholders shall have
obtained all necessary government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly
executed in form satisfactory to Pentegra and its counsel, referred to in
SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or
payables between Contributor and its shareholders or affiliates and Contributor
shall not have any liabilities, including indebtedness, guaranties and capital
leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Contributor and Shareholders shall have named Pentegra as
an additional insured on their liability insurance program in accordance with
SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Contributor since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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.
At or prior to the date that the Registration Statement is declared effective by
the SEC, Pentegra shall have received all state securities and "Blue Sky"
permits necessary to consummate the transactions contemplated hereby. The
Pentegra Common Stock shall have been approved for listing on Nasdaq or other
exchange selected by Pentegra, subject only to official notification of
issuance.
SECTION 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
<PAGE>
The obligations of Contributor and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pentegra contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Contributor shall have received all documents,
duly executed in form satisfactory to Contributor and its counsel, referred to
in SECTION 9.2.
8.5 SECURITIES APPROVAL. 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.
At or prior to the date that the Registration Statement is declared effective by
the SEC, Pentegra shall have received all state securities and "Blue Sky"
permits necessary to consummate the transactions contemplated hereby. The
Pentegra Common Stock shall have been approved for listing on Nasdaq or other
exchange selected by Pentegra, subject only to official notification of
issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. Within five business days
after requested by Pentegra, Contributor and Shareholders shall deliver to
Pentegra the following, all of which shall be in a form satisfactory to counsel
to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra)
in escrow pending Closing, pursuant to an escrow agreement or letter agreement
in form and substance mutually acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals of
all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of
Contributor authorizing the execution, delivery and performance of this
Agreement, the Service Agreement, the Employment Agreements and all related
documents and agreements each certified by the Secretary as being true and
correct copies of the original thereof;
(d) a bill of sale conveying the Assets to Pentegra;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
<PAGE>
(f) certificates of the Shareholders and a duly authorized officer of
Contributor dated as of the Closing Date, (i) as to the truth and correctness of
the representations and warranties of Contributor and Shareholder contained
herein; (ii) as to the performance of and compliance by Contributor and
Shareholder with all covenants contained herein; and (iii) certifying that all
conditions precedent of Contributor and Shareholders to the Closing have been
satisfied;
(g) a certificate of the Secretary of Contributor certifying as to
the incumbency of the directors and officers of Contributor and as to the
signatures of such directors and officers who have executed documents delivered
at the Closing on behalf of Contributor;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Contributor and any state of required
foreign qualification of Contributor establishing that Contributor is in
existence and is in good standing to transact business in its state of
incorporation;
(i) an opinion of counsel to Contributor and Shareholder opining as
to the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Contributor, the enforceability of this Agreement and the other agreements and
documents to be executed in connection herewith, and other matters reasonably
requested by Pentegra;
(j) non-foreign affidavits executed by Contributor;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Contributor, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall
deliver to Contributor and Shareholder, the following, all of which shall be in
a form satisfactory to counsel to Contributor and Shareholders and shall be held
by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing,
pursuant to an escrow agreement or letter agreement in form and substance
mutually acceptable to the parties hereto:
(a) the Acquisition Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance of
this Agreement and all related documents and agreements each certified by the
Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii) certifying
that all conditions
<PAGE>
precedent of Pentegra to the Closing have been satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and the
State of incorporation of Contributor;
(h) an opinion of counsel to Pentegra opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Pentegra, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Contributor;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Contributor to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit attached hereto, any agreement executed pursuant hereto, and any
certificate executed and delivered by any party pursuant to the terms of this
Agreement, shall constitute representations and warranties of Contributor and
Shareholders, jointly and severally, or of Pentegra, as the case may be. All
such representations and warranties, and all representations and warranties
expressly labeled as such in this Agreement shall survive the date of this
Agreement and the Closing Date for a period of five (5) years following the
Closing Date, except that (i) the representations and warranties with respect to
environmental and medical waste laws and health care laws and matters shall
survive for a period of fifteen (15) years and tax representations shall survive
until one year after the expiration of the applicable statute of limitations.
Each party covenants with the other parties not to make any claim with respect
to such representations and warranties, against any party after the date on
which such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless
such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4
hereof, as the case may be. Each party hereby releases, acquits and discharges
the other party from any and all claims and demands, actions and causes of
action, damages, costs, expenses and rights of setoff with respect to which the
notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely
provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD CONTRIBUTOR AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING CONTRIBUTOR AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"),
HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS,
SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO,
REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY
REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY,
<PAGE>
AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE
FURNISHED BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY
PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF,
OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. CONTRIBUTOR AND
SHAREHOLDERS (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD
PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND
EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS
SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED
PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS,
DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT
LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING
FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER, AND
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS WHETHER ON OR
AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY CONTRIBUTOR OR ITS SHAREHOLDERS OR THEIR
CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR
FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY
<PAGE>
OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE
CONTRIBUTOR OR SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY
PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF CONTRIBUTOR OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY
RELATED TO OR AFFILIATED WITH THE CONTRIBUTOR OR SHAREHOLDER ARISING FROM OR AS
A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF CONTRIBUTOR OR THE SHAREHOLDERS FOR COSTS AND
EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION
WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(B), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS AND
PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE CONTRIBUTOR OR ITS SHAREHOLDERS
SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION
STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR
SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED
OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS
SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the defense
of such action or proceeding, such Indemnified Person shall notify Indemnitor
thereof. If any such action or other proceeding shall be brought against any
Indemnified Person, Indemnitor shall, upon written notice given within a
reasonable time following receipt by Indemnitor of such notice from Indemnified
Person, be entitled to assume the defense of such action or proceeding with
counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person;
provided, however, that any Indemnified Person may at its own expense retain
separate counsel to participate in such defense. Notwithstanding the foregoing,
Indemnified Person shall have the right to employ separate counsel at
Indemnitor's expense and to control its own defense of such action or proceeding
if, in the reasonable opinion of counsel to such Indemnified Person, (a) there
are or may be legal defenses available to such Indemnified Person or to other
Indemnified Persons that are different from or additional to those available to
Indemnitor and which could not be adequately advanced by counsel chosen by
Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor
and such Indemnified Person that would make such separate representation
advisable; provided, however, that in no event shall Indemnitor
<PAGE>
be required to pay fees and expenses hereunder for more than one firm of
attorneys of Indemnified Person in any jurisdiction in any one action or
proceeding or group of related actions or proceedings. Indemnitor shall not,
without the prior written consent of any Indemnified Person, settle or
compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding to which such Indemnified Person is a
party unless such settlement, compromise or consent includes an unconditional
release of such Indemnified Person from all liability arising or potentially
arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Contributor or any Shareholder giving
rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra
shall be entitled to offset the amount of damages incurred by it as a result of
such breach of warranty, representation, covenant or agreement against any
amounts payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of
Contributor or Shareholder contained in this Agreement or in any certificate or
other document executed and delivered by Contributor or any Shareholder pursuant
to this Agreement is or becomes untrue or breached in any material respect or if
Contributor or any Shareholder fails to comply in any material respect with any
covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
(c) at any time by Contributor or any Shareholder if any representation
or warranty of Pentegra contained in this Agreement or in any certificate or
other document executed and delivered by Pentegra pursuant to this Agreement is
or becomes untrue or breached in any material respect or if Pentegra fails to
comply in any material respect with any covenant or agreement contained herein
and such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra, Shareholders or Contributor if the transaction
contemplated hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Contributor, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Contributor shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of
Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer shall
be treated as effective for any purpose or (b) engage in any transaction,
whether or not with respect to any shares of Pentegra Common Stock or any
interest therein, the intent or effect of which is to reduce the risk of owning
shares of Pentegra Common Stock. The certificates evidencing the Pentegra
Common Stock delivered to Contributor pursuant to the terms hereof will bear a
legend substantially in the form set forth below and containing such other
information as Pentegra may deem necessary or appropriate:
<PAGE>
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Shareholders
acknowledge that the shares of Pentegra Common Stock to be delivered to
Contributor pursuant to this Agreement have not been and will not be registered
under the Securities Act of 1933 and may not be resold without compliance with
the Securities Act of 1933. The Pentegra Common Stock to be acquired by
Contributor pursuant to this Agreement is being acquired solely for its own
account, for investment purposes only and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution. Contributor covenants, warrants and represents that none of the
shares of Pentegra Common Stock issued to it will be offered, sold, assigned,
pledged, hypothecated, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the Securities Act, as
amended, and the rules and regulations of the Securities Exchange Commission and
applicable state securities laws and regulations. All certificates evidencing
shares of Pentegra Common Stock shall bear the following legend in addition to
the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Contributor resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Shareholders are able
to bear the economic risk of an investment in Pentegra Common Stock acquired
pursuant to this Agreement and can afford to sustain a total loss of such
investment and have such knowledge and experience in financial and business
matters that they are capable of evaluating the merits and risks of the proposed
investment and therefore have the capacity to protect their own interests in
connection with the acquisition of the Pentegra Common Stock. Contributor,
Shareholders and their representatives have had an adequate opportunity to ask
questions and receive answers from the officers of Pentegra concerning any and
all matters relating to the background and experience of the officers and
directors of Pentegra, the plans for the operations of the business of Pentegra,
and any plans for additional acquisitions and the like. Contributor,
Shareholders and their representatives have asked any and all questions in the
nature described in the preceding sentence and all questions have been answered
to their satisfaction. Contributor and Shareholders are "accredited investors"
as defined in Regulation D of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Contributor and Shareholders agree that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally through
no fault of Contributor or Shareholders, (ii) disclosure is required by law or
the order of any governmental authority under color of law, provided, that prior
to disclosing any information pursuant to this clause (ii), Contributor and
Shareholders shall, if possible, give prior written notice thereof to the other
parties hereto, and provide such other parties hereto with the
<PAGE>
opportunity to contest such disclosure, (iii) Contributor and Shareholders
reasonably believe that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party, or (iv) Contributor and
Shareholders are the sole and exclusive owner of such confidential information
as a result of the transactions contemplated hereunder or otherwise. In the
event of a breach or threatened breach by Contributor or Shareholders of the
provisions of this SECTION 13, Pentegra shall be entitled to an injunction
restraining Contributor and Shareholders from disclosing, in whole or in part,
such confidential information. Nothing herein shall be construed as
prohibiting Pentegra from pursuing any other available remedy for such breach
or threatened breach, including the recovery of damages. The obligations of
the parties under this SECTION 13 shall survive the termination of this
Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement, together with the transactions contemplated by the Other
Agreement and the Initial Public Offering, will qualify as an exchange meeting
the requirements of Section 351 of the Code. The tax returns (and schedules
thereto) of Shareholders, Contributor and Pentegra shall be filed in a manner
consistent with such intention and Contributor and Pentegra shall each provide
the other with such tax information, reports, returns or schedules as may be
reasonably required to assist the other in so reporting the transactions
contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand delivery,
or by facsimile AND overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Contributor or Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
<PAGE>
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this Agreement,
whether or not such transactions are consummated. Without limiting the
generality of the foregoing and whether or not such liabilities may be deemed to
have been incurred in the ordinary course of business, Pentegra shall not be
liable to or required to pay, either directly or indirectly, any fees and
expenses of legal counsel, accountants, auditors or other persons or entities
retained by Contributor or any Shareholder for services rendered in connection
with negotiating and closing the transactions contemplated by this Agreement or
the documents to be executed in connection herewith, whether or not such costs
or expenses are incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure, either
written or oral, regarding the transactions contemplated by this Agreement
without the prior written consent of the other party, provided that the
foregoing shall not prohibit any disclosure (a) by press release, filing or
otherwise that Pentegra has determined in good faith judgment to be required by
Federal securities laws or the rules of the National Association of Securities
Dealers, (b) to attorneys, accountants, investment bankers or other agents of
the parties assisting the parties in connection with the transactions
contemplated by this Agreement, and (c) by Pentegra in connection with the
conduct of its Initial Public Offering and conducting an examination of the
operations and assets of Contributor.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF
CONTRIBUTOR AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS
PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are
integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and not
only in connection with the specific representation in which they are explicitly
referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS
ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY
AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR
ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one and the same
instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and
shall inure to the
<PAGE>
benefit of, the parties hereto, and their respective successors and assigns,
and no other person shall acquire or have any right under or by virtue of this
Agreement. No party may assign any right or obligation hereunder without the
prior written consent of the other parties; provided, however, that Pentegra
may assign its rights and delegate its obligations hereunder to any entity
that is an affiliate of Pentegra. For purposes of this Agreement an
"affiliate" of Pentegra shall include any entity that, through one or more
intermediaries is, controlled, controlled by or under common control with,
Pentegra. Upon any such assignment prior to the Closing, all references
herein to Pentegra (including those to Pentegra Common Stock) shall be deemed
to include references to the assignee and the assignee's common stock.
Notwithstanding any such assignment, Pentegra shall not, absent a written
release from Contributor, be relieved from its obligations to Contributor
under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or
Contributor, on the other hand, file suit in any court against any other party
to enforce the terms of this Agreement against the other party or to obtain
performance by it hereunder, the prevailing party will be entitled to recover
all reasonable costs, including reasonable attorneys' fees, from the other party
as part of any judgment in such suit. The term "prevailing party" shall mean the
party in whose favor final judgment after appeal (if any) is rendered with
respect to the claims asserted in the Complaint. "Reasonable attorneys' fees"
are those reasonable attorneys' fees actually incurred in obtaining a judgment
in favor of the prevailing party.
14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and pro-
rated among Contributor and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes and
shall pay Contributor or may demand from Contributor, and Contributor agrees to
pay, the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing, and
signed by the parties hereto. The waiver of any of the terms and conditions of
this Agreement shall not be construed as a waiver of any other terms and
conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Contributors or Shareholders (hereinafter referred to as a "Party"), whether
made before or after the institution of any legal proceeding, any dispute among
the parties hereto in any way arising out of, related to, or in connection with
this Agreement (hereinafter a "Dispute"), shall be resolved by binding
arbitration in accordance with the terms of this Section (hereinafter the
"Arbitration Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in accordance
with the terms of this Arbitration Program, the Commercial Arbitration Rules of
the AAA. In the event of any inconsistency between this Arbitration Program and
those rules or statutes, then the terms of this Arbitration Program shall
control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been completed
and the arbitrators have determined each party's post-arbitration obligations
and responsibilities as it relates to such warranties and covenants. No
provision of, nor the exercise of any rights under, this Arbitration Program
shall limit the right of any Party at any time to seek or use ancillary or
preliminary judicial or non-judicial self help remedies for the purposes of
obtaining, perfecting, preserving, or foreclosing upon any personal property in
which there has been granted a security interest or lien by a Party in the
Documents. In Disputes involving indebtedness or other monetary obligations,
each Party agrees that the other Party may proceed against all liable persons,
jointly and severally against one or more of them, without impairing rights
against other liable persons. Nor shall a Party be required to join the
principal obligor or any other liable
<PAGE>
persons (e.g., sureties or guarantors) in any proceeding against a particular
person. A Party may release or settle with one or more liable persons as the
Party deems fit without releasing or impairing rights to proceed against any
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing, of
that Party's desire to arbitrate a dispute; and each Party shall, within twenty
(20) days from the date such notification is received, select an arbitrator, and
those two arbitrators shall select a third arbitrator within ten (10) days
thereafter. The issues or claims in dispute shall be committed to writing,
separately stated and numbered, and each party's proposed answers or contentions
shall be signed below the questions. Failure by a party to select an arbitrator
within the prescribed time period shall serve as that Party's acquiescence and
acceptance of the other party's selection of arbitrator. The arbitrators shall
resolve all Disputes in accordance with the applicable substantive law. Any
Dispute shall be decided by a majority vote of three arbitrators, unless the
claim or amount in controversy does not exceed $100,000.00, in which case a
single arbitrator (who shall have authority to render a maximum award of
$100,000.00, including all damages of any kind, costs and fees) may decide the
Dispute. The arbitrators may grant any remedy or relief that the arbitrators
deem just and equitable and within the scope of this Arbitration Program. The
arbitrators may also grant such ancillary relief as is necessary to make
effective the award. In all arbitration proceedings the arbitrators shall make
specific and written findings of fact and conclusions of law. In all
arbitration proceedings in which the amount in controversy exceeds $100,000.00,
in the aggregate, the Parties shall have in addition to the statutory right to
seek vacation or modification of any award pursuant to applicable law, the right
to seek vacation or modification of any award that is based in whole, or in
part, on an incorrect or erroneous ruling of law by appeal to an appropriate
court having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must be
filed in a court having jurisdiction over the Dispute within 15 days from the
date the award in rendered. The arbitrators' findings of fact shall be binding
on all Parties and shall not be subject to further review except as otherwise
allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in writing
by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the
headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this
Arbitration Program shall survive any termination, amendment, or expiration of
the Documents, unless the Parties otherwise expressly agree in writing making
specific reference to this Arbitration Program. To the extent permitted by
applicable law, the arbitrator shall have the power to award recovery of all
costs and fees (including attorney's fees, administrative fees, and arbitrators'
fees) to the prevailing Party. This Arbitration Program may be amended,
changed, or modified only by a writing which specifically refers to this
Arbitration Program and which is signed by all the Parties. If any term,
covenant, condition or provision of the Arbitration Program is found to be
unlawful or invalid or unenforceable, such illegality or invalidity or
unenforceable shall not affect the legality, validity or enforceability of the
remaining parts of this Arbitration Program, and all such remaining parts hereof
shall be valid and enforceable and have full force and effect as if the illegal,
invalid or unenforceable part had not been included. Each Party agrees to keep
all Disputes and arbitration proceedings strictly confidential, except for
disclosures of information required in the ordinary course of business of the
Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be found to
be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect. In lieu of such
provision, there shall be added automatically as part of this Agreement, a
provision as similar in its terms to such provision as may be possible and be
legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
ALAN H. GERBHOLZ, D.D.S., P.C.
By: The AMG Trust, Shareholder
By: /s/ Alan H. Gerbholz
---------------------------------------
Alan H. Gerbholz, Co-Trustee
By: /s/ Melanie L. Gerbholz
---------------------------------------
Melanie L. Gerbholz, Co-Trustee
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
---------------------------------------
Its: Senior VP
---------------------------------------
THE AMG TRUST
By: /s/ Alan H. Gerbholz
---------------------------------------
Alan H. Gerbholz, Co-Trustee
By: /s/ Melanie L. Gerbholz
---------------------------------------
Melanie L. Gerbholz, Co-Trustee
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment
Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
MICHAEL J. GERSHTENSON, D.D.S., P.C.
and
MICHAEL J. GERSHTENSON, D.D.S.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
E Page
----
<S> <C>
Section 1. TERMS OF THE REORGANIZATION
1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . . . . 2
1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 4
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 9
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.17 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.18 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.19 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.20 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 12
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 12
Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 13
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 13
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 13
7.7 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.8 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 14
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 14
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 14
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
<PAGE>
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . . . 17
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 18
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 19
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 20
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . 21
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . 22
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . 22
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . 22
14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and
executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra"), MICHAEL J. GERSHTENSON, D.D.S., P.C., a
Colorado professional corporation ("Company") and MICHAEL J. GERSHTENSON,
D.D.S., the sole shareholder of the Company (referred to herein as
"Shareholder" or "Shareholders").
WITNESSETH:
WHEREAS, Company operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, the Boards of Directors of the Company and Pentegra have
determined that a reorganization between each of them is in the best interests
of their respective companies;
WHEREAS, Pentegra or its affiliated designee has entered into or intends to
enter into Agreements and Plans of Reorganization, Asset Contribution Agreements
and other acquisition agreements (collectively, the "Other Agreements") with
such persons or entities or the stockholders of such entities listed on EXHIBIT
A (together with Company, the "Target Companies") and simultaneously with the
closing of the reorganization contemplated herein, intends to consummate its
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock");
WHEREAS, it is intended for Federal income tax purposes that the
reorganization contemplated by this Agreement shall qualify as an reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE REORGANIZATION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock
is consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".
1.2 MERGER. Subject to and upon the terms and conditions contained
herein, on the Closing Date, the Company shall be merged with and into Pentegra
(or its designated affiliate, in which case, the references herein to Pentegra
shall be to such designated affiliate and its shares of common stock) in
accordance with this Agreement and the separate corporate existence of the
Company shall thereupon cease
<PAGE>
("Merger"). Pentegra shall be the surviving corporation in the Merger
("Surviving Corporation") and shall continue to be governed by the laws of
the State of Delaware and the separate corporate existence of Pentegra with
all rights, privileges, powers, immunities and purposes shall continue
unaffected by the Merger. The Merger shall have the effects specified in the
Delaware General Corporation Law and the Colorado Business Corporation Law.
If all the conditions to the Merger set forth herein shall have been
fulfilled or waived in accordance herewith and this Agreement shall not have
been terminated in accordance herewith, the parties hereto shall cause to be
properly executed and filed on the Closing Date Certificates of Merger for
the Company meeting the applicable legal requirements. The Mergers shall
become effective on the Closing Date or the filing of such documents, in
accordance with applicable law, or at such later time as the parties hereto
have agreed upon and designated in such merger filings.
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of
Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation
and Bylaws of the Surviving Corporation until duly amended in accordance with
their terms.
1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra
immediately prior to the effective date of the Merger shall be the directors of
the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
Bylaws. The persons who are officers of Pentegra immediately prior to the
effective date of the Merger shall be the officers of the Surviving Corporation
and shall hold their respective offices until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal.
1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and
without any action on the part of the holder thereof, all shares of the
Company's common stock issued and outstanding on the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired and
shall cease to exist, and each holder of a certificate of representing shares
of Company common stock shall thereafter cease to have any rights with
respect to such shares except the right to receive the consideration set
forth on ANNEX I attached hereto (the "Merger Consideration"). Each share
of common stock of the Company held in treasury at the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired
without payment of any consideration therefor. On the effective date of the
Merger, each share of Pentegra Common Stock issued and outstanding shall, by
virtue of the Mergers, and without any action on the part of the holder
thereof, continue unchanged and remain outstanding as a share of validly
issued, fully paid and nonassessable share of Surviving Corporation common
stock.
1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger,
the Shareholders, as the holders of a certificate or certificates representing
shares of Company common stock shall, upon surrender of such certificate or
certificates, receive the Merger Consideration, and until the certificate or
certificates of Company common stock shall have been surrendered by the
Shareholder and replaced by a certificate or certificates representing Pentegra
Common Stock (as set forth on ANNEX I), the certificate or certificates of
Company common stock shall, for all purposes be deemed to evidence ownership of
the number of shares of Pentegra Common Stock determined in accordance with the
provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the
Shareholders in the Merger shall be deemed for all purposes to have been issued
by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at
Closing the certificate or certificates representing the Company common stock
owned by them, duly endorsed in blank by the Shareholders, or accompanied by
duly executed blank stock powers, and with all necessary transfer tax and other
revenue stamps, acquired at the Shareholder's expense, affixed and cancelled.
1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under
<PAGE>
any of the Assets or otherwise to carry out this Agreement, in return for the
consideration set forth in this Agreement, the Company and Shareholders shall
excecute and deliver all such deeds, bills of sale, assignments and
assurances and take and do all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under the Assets in Pentegra or otherwise to carry
out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional
corporation or association, as applicable, duly organized, validly existing and
in good standing under the laws of the State of Colorado. Company has all
necessary corporate powers to own all of its assets and to carry on its business
as such business is now being conducted. Company does not own stock in or
control, directly or indirectly, any other corporation, association or business
organization, nor is Company a party to any joint venture or partnership. The
Shareholders are the sole shareholders of Company and own all outstanding shares
of capital stock free of all security interests, claims, encumbrances and liens
in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock
has been legally and validly issued and fully paid and nonassessable. No shares
of capital stock of Company are owned by Company in treasury. There are no
outstanding (a) bonds, debentures, notes or other obligations the holders of
which have the right to vote with the stockholders of Company on any matter, (b)
securities of Company convertible into equity interests in Company, or (c)
commitments, options, rights or warrants to issue any such equity interests in
Company, to issue securities of Company convertible into such equity interests,
or to redeem any securities of Company. No shares of capital stock of Company
have been issued or disposed of in violation of the preemptive rights, rights of
first refusal or similar rights of any of Company's stockholders. Company is
not required to qualify to do business as a foreign corporation in any other
state or jurisdiction by reason of its business, properties or activities in or
relating to such other state or jurisdiction. Company does not have any assets,
employees or offices in any state other than the state set forth in the first
sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power
to execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all action required by
law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to
authorize the execution, delivery and performance of this Agreement and such
related documents. Each Shareholder has the legal capacity to enter into and
perform this Agreement and the other agreements to be executed and delivered in
connection herewith. Company has obtained the approval of its stockholders
necessary to the consummation of the transactions contemplated herein. This
Agreement and all agreements and documents executed and delivered in connection
herewith have been, or will be as of the Closing Date, duly executed and
delivered by Company and Shareholders, as appropriate, and constitute or will
constitute the legal, valid and binding obligations of Company and Shareholders,
enforceable against Company and Shareholders in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of consents
described on EXHIBIT 2.4, the consummation of the actions contemplated hereby
will not, violate any provision of the Articles or Certificate of Incorporation
or Bylaws of Company or any provisions of, or result in the acceleration of, any
obligation under any mortgage, lien, lease, agreement, rent, instrument, order,
arbitration award, judgment or decree to which Company or any Shareholder is a
party or by which Company or any Shareholder is bound, or violate any material
restrictions of any kind to which Company is subject, or result in any lien or
encumbrance on any of Company's assets or the Assets.
<PAGE>
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets, or
waivers thereof, have been duly obtained and are in full force and effect and
are described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Company and Shareholders, threatened, which may result in the
revocation, cancellation or suspension, or any adverse modification, of any such
licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Company or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been declared or paid by Company on any of its capital stock
since the Balance Sheet Date. No repurchase of any of Company's capital stock
has been approved, effected or is pending, or is contemplated by Company.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Company and all amendments
thereto have been delivered to Pentegra. The minute books of Company contain
accurate minutes of all meetings of and consents to actions taken without
meetings of the Board of Directors and stockholders of Company since its
formation. The books of account of Company have been kept accurately in the
ordinary course of business and the revenues, expenses, assets and liabilities
of Company have been properly recorded in such books.
2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any related
unaudited statements of income, retained earnings, schedule of accounts
receivable, accounts payable and accrued liabilities, and cash flows for the
twelve months then ended (collectively, with the related notes thereto, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and results of operations of Company as of the dates and for the
periods indicated and reflect all fixed and contingent liabilities of Company.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Company or any Shareholder leases, as lessor or lessee, real
or personal property used in operating the Business, related to the Assets or
otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in
accordance with their respective terms, and there is not under any such lease
any existing default by Company, as lessor or lessee, or any condition or event
of which any Shareholder or Company has knowledge which with notice or lapse of
time, or both, would constitute a default, in respect of which Company or
Shareholders have not taken adequate steps to cure such default or to prevent a
default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Company and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set
forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to
<PAGE>
the Closing Date and evidence of such releases of liens and claims shall be
provided to Pentegra on the Closing Date and the Assets shall not be used to
satisfy such liens, claims or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned or
used by Company, are in good, current, standard and merchantable condition and
are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Company has no right, title or interest in or to patents, patent rights,
corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT
2.12 is a listing of all names of all predecessor companies of Company,
including the names of any entities from whom Company previously acquired
significant assets. Except for off-the-shelf software licenses and except as
set forth on EXHIBIT 2.12, Company is not a licensee in respect of any patents,
trademarks, service marks, trade names, copyrights or applications therefor, or
manufacturing processes, formulas or trade secrets or similar items and no such
licenses are necessary for the conduct of the Business or the use of the Assets.
No claim is pending or has been made to the effect that the Assets or the
present or past operations of Company in connection with the Assets or Business
infringe upon or conflict with the asserted rights of others to any patents,
patent rights, manufacturing processes, trade names, trademarks, service marks,
inventions, licenses, specialized treatment protocols, copyrights, formulas,
know-how and trade secrets. Company has the sole and exclusive right to use all
Assets constituting proprietary rights without infringing or violating the
rights of any third parties and no consents of any third parties are required
for the use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on
EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this
Agreement of: (a) the name of each director and officer of Company and the
offices held by each, (b) the most recent payroll report of Company, showing all
current employees of Company and their current levels of compensation, (c)
promised increases in compensation of employees of Company that have not yet
been effected, (d) oral or written employment agreements, consulting agreements
or independent contractor agreements (and all amendments thereto) to which
Company is a party, copies of which have been delivered to Pentegra, and (e) all
employee manuals, materials, policies, procedures and work-related rules, copies
of which have been delivered to Pentegra. Company is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Company has not engaged in any unfair labor practice.
There are no unfair labor practices charges or complaints pending or threatened
against Company, and Company has never been a party to any agreement with any
union, labor organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the Business
nor any of the Assets is subject to any pending, nor does Company or any
Shareholder have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Company, any Shareholder, the Business, the Assets or the transactions
contemplated by this Agreement, and, to the knowledge of Company and
Shareholders, no basis for any such action exists, nor is there any legal
impediment of which Company or any Shareholder has knowledge to the continued
operation of its business or the use of the Assets in the ordinary course,
subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Company has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts, obligations
and commitments of Company ("Contracts"), entered into in connection with and
related to the Assets or the Business, all of which are listed or incorporated
by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case
of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than
leases) attached hereto. Except as otherwise indicated on such Exhibits, all of
such Contracts are valid, binding and enforceable in accordance with their terms
and are in full force and effect, and no defenses, offsets or counterclaims have
been asserted or may be made by any party thereto. Except as indicated on such
Exhibits, there is not under any such Contract any existing default
<PAGE>
by Company or any Shareholder, or any condition or event of which Company or
any Shareholder has knowledge which with notice or lapse of time, or both,
would constitute a default. Company and Shareholders have no knowledge of any
default by any other party to such Contracts. Company and Shareholders have
not received notice of the intention of any party to any Contract to cancel
or terminate any Contract and have no reason to believe that any amendment or
change to any Contract is contemplated by any party thereto. Other than
those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT
2.13 and EXHIBIT 2.15, Company are not a party to any material written or
oral agreement contract, lease or arrangement, including without limitation,
any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product or
service;
(h) Loan agreement or other contract for money borrowed or lent or to
be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of the
Company or Shareholders, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Company on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) or entered into any contract, lease, license or
commitment, except in connection with the performance of this Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued, contingent
or otherwise) other than (i) liabilities shown or reflected on the Balance
Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary
course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
<PAGE>
(d) Made any payments to or loaned any money to any person or entity
other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have been
required due to income or operations of Company since the Balance Sheet Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants or
agents, or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of any officer, employee, consultant or agent;
(j) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties, assets
or business or the Business or the Assets, or experienced any other material
adverse change in its financial condition, assets, prospects, liabilities or
business;
(n) Declared or paid a distribution, payment or dividend of any kind
on the capital stock of Company;
(o) Repurchased, approved any repurchase or agreed to repurchase any
of Company's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Company has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it. All such tax returns are complete and accurate in all respects and
properly reflect the relevant taxes for the periods covered thereby. Company
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Company. There are no audits relating to taxes of
Company pending or in process or, to the knowledge of Company, threatened.
Company is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency. There are no
liens or encumbrances relating to taxes on or threatened against any of the
assets of Company. Company has withheld
<PAGE>
and paid all taxes required by law to have been withheld and paid by it.
Neither Company nor any predecessor of Company is or has been a party to any
tax allocation or sharing agreement or a member of an affiliated group of
corporations filing a consolidated Federal income tax return. Company has
delivered to Pentegra correct and complete copies of Company's three most
recently filed annual state, local and Federal income tax returns, together
with all examination reports and statements of deficiencies assessed against
or agreed to by Company during the three calendar year period preceding the
date of this Agreement. Company has neither made any payments, is obligated
to make any payments, or is a party to any agreement that under any
circumstance could obligate it to make any payments that will not be
deductible under Code section 280G.
(b) No Shareholder presently intends to dispose of any of the shares of
Pentegra Common Stock to be received hereunder nor is a party to any plan,
arrangement or agreement for the disposition of such shares. Company and
Shareholders have no knowledge, after due inquiry, of any such intent, plan,
arrangement or agreement by any Shareholder. Nothing contained herein shall
prohibit Shareholders from selling such shares of Pentegra Common Stock after
the designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated by
this Agreement which may be now or hereafter asserted against Pentegra, Company
or Company's shareholders resulting from any action taken by Company or any
Shareholder or their respective agents or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against
on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and
has not incurred since that date and will not have incurred as of the Closing
Date, any liabilities or obligations of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, other than those
incurred in the ordinary course of business or as set forth on EXHIBIT 2.16.
Company and Shareholders do not know, or have reasonable grounds to know, of any
basis for the assertion against Company or any Shareholder as of the Balance
Sheet Date, of any claim or liability of any nature in any amount not fully
reflected or reserved against on the Balance Sheet, or of any claim or liability
of any nature arising since that date other than those incurred in the ordinary
course of business or contemplated by this Agreement. All indebtedness of
Company (including without limitation, indebtedness for borrowed money,
guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached
hereto.
2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed
professional of Company carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the industry.
Valid and enforceable policies in such amounts are outstanding and duly in force
and will remain duly in force through the Closing Date. All such policies are
described in EXHIBIT 2.20 attached hereto and true and correct copies have been
delivered to Pentegra. Neither Shareholders nor Company have not received
notice or other communication from the issuer of any such insurance policy
cancelling or amending such policy or threatening to do so. Neither Company,
nor any Shareholder nor any licensed professional employee of Company has any
outstanding claims, settlements or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached
hereto, Company has neither established, nor maintains, nor is obligated to make
contributions to or under or otherwise participate in, (a) any bonus or other
type of compensation or employment plan, program, agreement, policy, commitment,
contract or arrangement (whether or not set forth in a written document); (b)
any pension, profit-sharing, retirement or other plan, program or arrangement;
or (c) any other employee benefit plan, fund or program, including, but not
limited to, those described in SECTION 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT
2.20 (individually "Company
<PAGE>
Plan," and collectively "Company Plans") have been operated and administered
in all material respects in accordance with all applicable laws, rules and
regulations, including without limitation, ERISA, the Internal Revenue Code
of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment
Act of 1967, as amended, and the related rules and regulations adopted by
those Federal agencies responsible for the administration of such laws. No
act or failure to act by Company has resulted in a "prohibited transaction"
(as defined in ERISA) with respect to the Company Plans. No "reportable
event" (as defined in ERISA) has occurred with respect to any of the Company
Plans. Company has not previously made, is not currently making, and is not
obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Company Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at least equal to the
value of plan liabilities or (ii) the value of plan liabilities in excess of
plan assets is disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing
Date, a party to any agreement or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree, rule or
regulation that materially and adversely affects the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Company,
the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's
licensed professional employees, and the conduct of the Business and use of the
Assets, have complied with all applicable laws, rules, regulations and licensing
requirements, including, without limitation, the Federal Environmental
Protection Act, the Occupational Safety and Health Act, the Americans with
Disabilities Act and any environmental laws and medical waste laws, and there
exist no violations by Company, any Shareholder or any licensed professional
employee of Company of any Federal, state or local law or regulation. Company
and Shareholders have not received any notice of a violation of any Federal,
state and local laws, regulations and ordinances relating to the operations of
the Business and Assets and no notice of any pending inspection or violation of
any such law, regulation or ordinance has been received by Company.
2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed
professional employee or independent contractor of Company has timely filed all
claims or other reports required to be filed with respect to the purchase of
services by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are no
pending appeals, overpayment determinations, adjustments, challenges, audit,
litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Company, any Shareholder
and each licensed professional employee of Company. Neither Company, nor any
Shareholder, nor any licensed professional employee of Company has been
convicted of, or pled guilty or nolo contendere to, patient abuse or negligence,
or any other Medicare or Medicaid program related offense and none has committed
any offense which may serve as the basis for suspension or exclusion from the
Medicare and Medicaid programs or any other third party payor program. With
respect to payors, Company, Shareholders and Company's licensed professional
employees has not (a) knowingly and willfully making or causing to be made a
false statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in determining
rights to any benefit or payment; (c) failed to disclose knowledge of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company
or Shareholders in this Agreement, and no Exhibit or certificate issued or
executed by, or information furnished by, officers or directors of Company or
any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or
in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a
<PAGE>
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Company has with any bank or other
financial institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Company, or their respective spouses,
children or affiliates, owns directly or indirectly, on an individual or joint
basis, any interest in, has a compensation or other financial arrangement with,
or serves as an officer or director of, any customer or supplier or competitor
of Company or any organization that has a material contract or arrangement with
Company.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of
the names and addresses of each payor of Company's services which accounted for
more than 10% of revenues of Company in the preceding fiscal year. Company has
good relations with all such payors and other material payors of Company and
none of such payors has notified Company that it intends to discontinue its
relationship with Company or to deny any claims submitted to such payor for
payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Company and Shareholders as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions required
by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize
the execution, delivery and performance of this Agreement and such related
documents. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing Date,
duly executed and delivered by Pentegra and constitute or will constitute the
legal, valid and binding obligations of Pentegra, enforceable against Pentegra
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and delivery
of this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and, the
consummation of the actions contemplated hereby will not, violate any provision
of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or decree
to which Pentegra is a party or by which Pentegra is bound, or violate any
material restrictions of any kind to which Pentegra is subject, or result in any
lien or encumbrance on any of Pentegra's assets. Other than as have been
obtained or as would not have a material adverse effect, there are no consents
of any person or entity required for the transaction contemplated hereby on
behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon
<PAGE>
Pentegra. Other than as would not have a material adverse effect, there are
no proceedings pending or, to the knowledge of Pentegra, threatened, which
may result in the revocation, cancellation or suspension, or any adverse
modification, of any such licenses or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any pending,
nor does Pentegra have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Pentegra, its business, assets or the transactions contemplated by
this Agreement, and, to the knowledge of Pentegra, no basis for any such action
exists, nor is there any legal impediment of which Pentegra has knowledge to the
continued operation of its business or the use of its Assets in the ordinary
course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports and
other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it, other than as would not have a material adverse effect. Pentegra
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Pentegra. There are no audits relating to taxes of
Pentegra pending or in process or, to the knowledge of Pentegra, threatened.
Pentegra is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the reorganization contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the reorganization contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra
in this Agreement, and no Exhibit or certificate issued by officers or directors
of Pentegra and furnished or to be furnished to Company or any Shareholder
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, agree that between the
date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall
use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Company and
Shareholders agree to complete the Exhibits hereto to be provided by them in
form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the
Business and use the Assets in the ordinary course. Company and Shareholders
shall not enter into any lease, contract, indebtedness, commitment, purchase or
sale or acquire or dispose of any capital asset relating to the Business or the
Assets except in the ordinary course of business. Company and Shareholders
shall use their best efforts to preserve the Business and Assets intact and
shall not take any action that would have an adverse effect on the Business or
Assets. Company and Shareholders shall use their best efforts to preserve
intact the
<PAGE>
relationships with payors, customers, suppliers, patients and others having
significant business relations with Company. Company and Shareholders shall
collect its receivables and pay its trade payables in the ordinary course of
business. Company and Shareholdes shall not introduce any new method of
management, operations or accounting.
4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and
its authorized representatives access to, and make available for inspection, all
of the assets and business of Company, the Business and the Assets, including
employees, customers and suppliers and permit Pentegra and its authorized
representatives to inspect and make copies of all documents, records and
information with respect to the business or assets of Company, the Business or
the Assets as Pentegra or its representatives may request. Company and
Shareholders shall promptly notify Pentegra in writing of (a) any notice or
communication relating to a default or event that, with notice or lapse of time
or both, could become a default, under any contract, commitment or obligation to
which Company is a party or relating to the Business or the Assets, and (b) any
adverse change in Company's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and
Shareholders shall use their best efforts to secure all necessary approvals and
consents of third parties to the consummation of the transactions contemplated
hereby, including consents described on EXHIBIT 2.4. Company and Shareholders
shall use their best efforts to obtain all licenses, permits, approvals or other
authorizations required under any law, rule, regulation, or otherwise to provide
the services of the Practice contemplated by the Service Agreement and to
conduct the intended business of the Practice and operate the Business and use
the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of Closing or the termination of this Agreement in accordance with the
provisions hereof, Company and Shareholders shall not, and shall use its best
efforts to cause Company's employees, agents and representatives not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer, including without limitation,
any proposal or offer to any Shareholder, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of Company or engage
in any negotiations concerning, or provide any confidential information or data
to, or have any discussions with, any person relating to such proposal or offer,
and Company and Shareholders will immediately cease any such activities,
discussions or negotiations heretofore conducted with respect to any of the
foregoing. Company and Shareholders shall immediately notify Pentegra if any
such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund completely
for any accrued benefits, where applicable, or vested accrued benefits for which
Company or any entity might have any liability whatsoever arising from any
insurance, pension plan, employment tax or similar liability of Company to any
employee or other person or entity (including, without limitation, any Company
Plan and any liability under employment contracts with Company) allocable to
services performed prior to the Closing Date. Company and Shareholders
acknowledge that the purpose and intent of this covenant is to assure that
Pentegra shall have no unfunded liability whatsoever at any time after the
Closing Date with respect to any of Company's employees or similar persons or
entities, including, without limitation, any Company Plan for the period prior
to the Closing Date.
4.7 EMPLOYEE MATTERS. Company shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of any Shareholder (other than in the ordinary course of business) or other
employee or an independent contractor of Company, adopt, amend or terminate any
compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect
<PAGE>
upon Company, its business, assets or prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Company, nor will any repurchase of any
of Company's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall
use their best efforts to take, or cause to be taken, all actions necessary to
effect the reorganization contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change
in any material respect the tax or financial accounting methods or practices
followed by Company (including any material change in any assumption underlying,
or any method of calculating, any bad debt, contingency or other reserve),
except as may be required by law or generally accepted accounting principles.
Company and Shareholders will duly, accurately and timely (without regard to any
extensions of time) file all returns, information statements and other documents
relating to taxes of Company required to be filed by it, and pay all taxes
required to be paid by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Company hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Company and Shareholders covenant and agree that all of the
creditors with respect to the Business and the Assets will be paid in full by
Company prior to the Closing Date, except to extent that any liability to such
creditors is assumed by Pentegra pursuant to this Agreement. If required by
Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment
of all creditors with respect to the Business and the Assets. Notwithstanding
the foregoing, Company and Shareholders may dispute the validity or amount of
any such creditor's claim without being deemed to be in violation of this
SECTION 4.11, provided that such dispute is in good faith and does not
unreasonably delay the resolution of the claim and provided, further that
Company and Shareholders agree to indemnify and bond Pentegra for such amounts
as is satisfactory to Pentegra.
4.12 LEASE. If Company leases any of its premises from any Shareholder or
other affiliate of Company or any shareholder of Company, Pentegra shall have
entered into a building lease (the "Building Lease") with the owner of such
premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, (i) a five year initial
term plus three five-year renewal options, (ii) a lease rate equal to the fair
market value lease rate, as agreed to by Pentegra, and (iii) such other
provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with
all requests made by Pentegra for the purpose of allowing Pentegra to hire those
non-dentist employees of Company designated by Pentegra, such employment to be
effective as of the Closing Date. Notwithstanding the above, Company and
Shareholders shall remain liable under any Company Plans for any claims incurred
by any employees or their spouses or dependents, and for all compensation,
bonuses, benefits and other such items and other liabilities related to
Company's employees incurred by Company prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all
employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be
treated as "leased employees" (as defined in Code Section 414(n)) of Company and
shall be treated as Clinic employees for purposes of eligibility and
participation in Company Plans.
4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective as
of the Closing Date.
<PAGE>
4.16 [INTENTIONALLY DELETED]
4.17 [INTENTIONALLY DELETED]
4.18 [INTENTIONALLY DELETED]
4.19 [INTENTIONALLY DELETED]
4.20 [INTENTIONALLY DELETED]
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS.
Pentegra, Shareholders and Company agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall
cooperate to promptly prepare and file with the Securities Exchange Commission
("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to
be filed by Pentegra in connection with its Initial Public Offering (including
the prospectus constituting a part thereof, the "Registration Statement").
Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits
and approvals required to carry out the transactions contemplated by this
Agreement and the Company and Shareholders shall furnish all information
concerning Company and Shareholders as may be reasonable requested in connection
with any such action.
Company and Shareholder represent and warrant that none of the information
or documents supplied or to be supplied by it specifically for inclusion in the
Registration Statement, by exhibit or otherwise, will, at the time the
Registration Statement and each amendment or supplement thereto, if any, becomes
effective under the Securities Act of 1933, 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, in light of the circumstances under
which they were made, not misleading. Company and Shareholders shall be
entitled to review the Registration Statement and each amendment thereto, if
any, prior to the time each becomes effective under the Securities Act of 1933.
Company and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by Pentegra
in connection with the preparation of the Registration Statement and each
amendment or supplement thereto, or any other statement, filing, notice or
application made by or on behalf of each such party or any of its subsidiaries
to any governmental entity in connection with the transactions contemplated by
the Other Agreements or this Agreement.
<PAGE>
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at or
prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Company and Shareholders contained herein shall have been true and correct in
all respects when initially made and shall be true and correct in all respects
as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Company and Shareholders prior to
the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Company shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Company, the Business and the Assets, the results of which shall
be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 [INTENTIONALLY DELETED]
7.8 [INTENTIONALLY DELETED]
7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained
all necessary government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly
executed in form satisfactory to Pentegra and its counsel, referred to in
SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or
payables between Company and its shareholders or affiliates and Company shall
not have any liabilities, including indebtedness, guaranties and capital leases,
that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an
additional insured on their liability insurance program in accordance with
SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Company since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. The Registration Statement shall have become
effective under the
<PAGE>
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. At or prior to
the date that the Registration Statement is declared effective by the SEC,
Pentegra shall have received all state securities and "Blue Sky" permits
necessary to consummate the transactions contemplated hereby. The Pentegra
Common Stock shall have been approved for listing on Nasdaq or other exchange
selected by Pentegra, subject only to official notification of issuance.
SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Company and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Pentegra contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Company shall have received all documents, duly
executed in form satisfactory to Company and its counsel, referred to in SECTION
9.2.
8.5 SECURITIES APPROVAL. 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.
At or prior to the date that the Registration Statement is declared effective by
the SEC, Pentegra shall have received all state securities and "Blue Sky"
permits necessary to consummate the transactions contemplated hereby. The
Pentegra Common Stock shall have been approved for listing on Nasdaq or other
exchange selected by Pentegra, subject only to official notification of
issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days
after requested by Pentegra, Company and Shareholders shall deliver to Pentegra
the following, all of which shall be in a form satisfactory to counsel to
Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in
escrow pending Closing, pursuant to an escrow agreement or letter agreement in
form and substance mutually acceptable to the parties hereto:
(a) [intentionally deleted];
(b) [intentionally deleted];
(c) a copy of the resolutions of the Board of Directors of Company
authorizing the execution, delivery and performance of this Agreement and all
related documents and agreements each certified by the Secretary as being true
and correct copies of the original thereof;
<PAGE>
(d) executed merger certificate and/or plan as required by
applicable state law;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra and the original stock certificates together
with blank stock powers representing the outstanding shares of Company common
stock;
(f) certificates of the Shareholders and a duly authorized officer of
Company dated as of the Closing Date, (i) as to the truth and correctness of the
representations and warranties of Company and Shareholder contained herein; (ii)
as to the performance of and compliance by Company and Shareholder with all
covenants contained herein; and (iii) certifying that all conditions precedent
of Company and Shareholders to the Closing have been satisfied;
(g) a certificate of the Secretary of Company certifying as to the
incumbency of the directors and officers of Company and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Company;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Company and any state of required
foreign qualification of Company establishing that Company is in existence and
is in good standing to transact business in its state of incorporation;
(i) an opinion of counsel to Company and Shareholder opining as to
the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Company, the enforceability of this Agreement and the other agreements and
documents to be executed in connection herewith, and other matters reasonably
requested by Pentegra;
(j) non-foreign affidavits executed by Company;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Company, in substantially the form attached hereto as EXHIBIT 9.1(L) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement and
any other instruments and agreements reasonably requested by Pentegra in
connection with any service arrangements to be provided by Pentegra to
Shareholder.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall
deliver to Company and Shareholders, the following, all of which shall be in a
form satisfactory to counsel to Company and Shareholders and shall be held by
Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing,
pursuant to an escrow agreement or letter agreement in form and substance
mutually acceptable to the parties hereto:
(a) the Merger Consideration;
(b) [intentionally deleted];
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
<PAGE>
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii) certifying
that all conditions precedent of Pentegra to the Closing have been satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and the
State of incorporation of Company;
(h) an opinion of counsel to Pentegra opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Pentegra, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Company;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Company to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in
any Exhibit attached hereto, any agreement executed pursuant hereto, and any
certificate executed and delivered by any party pursuant to the terms of this
Agreement, shall constitute representations and warranties of Company and
Shareholders, jointly and severally, or of Pentegra, as the case may be. All
such representations and warranties, and all representations and warranties
expressly labeled as such in this Agreement shall survive the date of this
Agreement and the Closing Date for a period of five (5) years following the
Closing Date, except that (i) the representations and warranties with respect to
environmental and medical waste laws and health care laws and matters shall
survive for a period of fifteen (15) years and tax representations shall survive
until one year after the expiration of the applicable statute of limitations.
Each party covenants with the other parties not to make any claim with respect
to such representations and warranties, against any party after the date on
which such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless
such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4
hereof, as the case may be. Each party hereby releases, acquits and discharges
the other party from any and all claims and demands, actions and causes of
action, damages, costs, expenses and rights of setoff with respect to which the
notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely
provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE
<PAGE>
FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"),
HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS,
SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO,
REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR
BY REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY
PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF,
OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR
TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3
AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND
SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS,
DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND
EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH
RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE
<PAGE>
ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER
THE CLOSING DATE,
(D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS
GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING
OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO
CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY
RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A
RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE
NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND
PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS
SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION
STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR
SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED
OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS
SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the defense
of such action or proceeding, such Indemnified Person shall notify Indemnitor
thereof. If any such action or other proceeding shall be brought against any
Indemnified Person, Indemnitor shall, upon written notice given
<PAGE>
within a reasonable time following receipt by Indemnitor of such notice from
Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Company or any Shareholder giving rise
to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be
entitled to offset the amount of damages incurred by it as a result of such
breach of warranty, representation, covenant or agreement against any amounts
payable by Pentegra hereunder or under any other agreements executed between
Pentegra and Shareholder.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Company
or any Shareholder contained in this Agreement or in any certificate or other
document executed and delivered by Company or any Shareholder pursuant to this
Agreement is or becomes untrue or breached in any material respect or if Company
or any Shareholder fails to comply in any material respect with any covenant or
agreement contained herein, and any such misrepresentation, noncompliance or
breach is not cured, waived or eliminated within twenty (20) days after receipt
of written notice thereof;
(c) at any time by Company or any Shareholder if any representation or
warranty of Pentegra contained in this Agreement or in any certificate or other
document executed and delivered by Pentegra pursuant to this Agreement is or
becomes untrue or breached in any material respect or if Pentegra fails to
comply in any material respect with any covenant or agreement contained herein
and such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra, Shareholders or Company if the transaction contemplated
hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Company, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date,
Shareholder shall not
<PAGE>
voluntarily (a) sell, assign, exchange, transfer, encumber, pledge,
distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common
Stock received by such party hereunder, (ii) any interest (including without
limitation, an option to buy or sell) in any shares of Pentegra Common Stock,
in whole or in part, and no such attempted transfer shall be treated as
effective for any purpose or (b) engage in any transaction, whether or not
with respect to any shares of Pentegra Common Stock or any interest therein,
the intent or effect of which is to reduce the risk of owning shares of
Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock
delivered to Company pursuant to the terms hereof will bear a legend
substantially in the form set forth below and containing such other
information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the
shares of Pentegra Common Stock to be delivered to Company pursuant to this
Agreement have not been and will not be registered under the Securities Act of
1933 and may not be resold without compliance with the Securities Act of 1933.
The Pentegra Common Stock to be acquired by Shareholders pursuant to this
Agreement is being acquired solely for its own account, for investment purposes
only and with no present intention of distributing, selling or otherwise
disposing of it in connection with a distribution. Each Shareholder covenants,
warrants and represents that none of the shares of Pentegra Common Stock issued
to it will be offered, sold, assigned, pledged, hypothecated, transferred or
otherwise disposed of except after full compliance with all of the applicable
provisions of the Securities Act, as amended, and the rules and regulations of
the Securities Exchange Commission and applicable state securities laws and
regulations. All certificates evidencing shares of Pentegra Common Stock shall
bear the following legend in addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Company resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the
economic risk of an investment in Pentegra Common Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and
have such knowledge and experience in financial and business matters that they
are capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect their own interests in connection with
the acquisition of the Pentegra Common Stock. Shareholders and their
representatives have had an adequate opportunity to ask questions and receive
answers from the officers of Pentegra concerning any and all matters relating to
the background and experience of the officers and directors of Pentegra, the
plans for the operations of the business of Pentegra, and any plans for
additional acquisitions and the like. Shareholders and their representatives
have asked any and all questions in the nature described in the preceding
sentence and all questions have been answered to their satisfaction.
Shareholders are "accredited investors" as defined in Regulation D of the
Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and
Shareholders recognize and
<PAGE>
acknowledge that they had in the past, currently have, and in the future may
possibly have, access to certain confidential information of Pentegra that is
valuable, special and unique assets of Pentegra's businesses. Company and
Shareholders agree that it will not disclose such confidential information to
any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, unless (i) such information becomes available to or known
by the public generally through no fault of Company or Shareholders, (ii)
disclosure is required by law or the order of any governmental authority
under color of law, provided, that prior to disclosing any information
pursuant to this clause (ii), Company and Shareholders shall, if possible,
give prior written notice thereof to the other parties hereto, and provide
such other parties hereto with the opportunity to contest such disclosure,
(iii) Company and Shareholders reasonably believe that such disclosure is
required in connection with the defense of a lawsuit against the disclosing
party, or (iv) Company and Shareholders are the sole and exclusive owner of
such confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Company or Shareholders of the provisions of this SECTION 13, Pentegra shall
be entitled to an injunction restraining Company and Shareholders from
disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Pentegra from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. The obligations of the parties under this SECTION 13 shall
survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement will qualify as a reorganization within the meaning of Section
368(a) of the Code. The tax returns (and schedules thereto) of Shareholders,
Company and Pentegra shall be filed in a manner consistent with such intention
and Shareholders and Pentegra shall each provide the other with such tax
information, reports, returns or schedules as may be reasonably required to
assist the other in so reporting the transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery, or by
facsimile AND overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Company and Shareholders:
<PAGE>
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this Agreement,
whether or not such transactions are consummated. Without limiting the
generality of the foregoing and whether or not such liabilities may be deemed to
have been incurred in the ordinary course of business, Pentegra shall not be
liable to or required to pay, either directly or indirectly, any fees and
expenses of legal counsel, accountants, auditors or other persons or entities
retained by Company or any Shareholder for services rendered in connection with
negotiating and closing the transactions contemplated by this Agreement or the
documents to be executed in connection herewith, whether or not such costs or
expenses are incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure, either
written or oral, regarding the transactions contemplated by this Agreement
without the prior written consent of the other party, provided that the
foregoing shall not prohibit any disclosure (a) by press release, filing or
otherwise that Pentegra has determined in good faith judgment to be required by
Federal securities laws or the rules of the National Association of Securities
Dealers, (b) to attorneys, accountants, investment bankers or other agents of
the parties assisting the parties in connection with the transactions
contemplated by this Agreement, and (c) by Pentegra in connection with the
conduct of its Initial Public Offering and conducting an examination of the
operations and assets of Company.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are
integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and not
only in connection with the specific representation in which they are explicitly
referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS
ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY
AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR
ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which
<PAGE>
when so executed shall be deemed to be an original, and such counterparts
shall together constitute and be one and the same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any entity
that, through one or more intermediaries is, controlled, controlled by or under
common control with, Pentegra. Upon any such assignment prior to the Closing,
all references herein to Pentegra (including those to Pentegra Common Stock)
shall be deemed to include references to the assignee and the assignee's common
stock. Notwithstanding any such assignment, Pentegra shall not, absent a
written release from Company, be relieved from its obligations to Company under
this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Company, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Company and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes and
shall pay Company or may demand from Company, and Company agrees to pay, the
amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing, and
signed by the parties hereto. The waiver of any of the terms and conditions of
this Agreement shall not be construed as a waiver of any other terms and
conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Companys or Shareholders (hereinafter referred to as a "Party"), whether made
before or after the institution of any legal proceeding, any dispute among the
parties hereto in any way arising out of, related to, or in connection with
this Agreement (hereinafter a "Dispute"), shall be resolved by binding
arbitration in accordance with the terms of this Section (hereinafter the
"Arbitration Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in accordance
with the terms of this Arbitration Program, the Commercial Arbitration Rules of
the AAA. In the event of any inconsistency between this Arbitration Program and
those rules or statutes, then the terms of this Arbitration Program shall
control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been completed
and the arbitrators have determined each party's post-arbitration obligations
and responsibilities as it relates to such warranties and covenants. No
provision of, nor the exercise of any rights under, this Arbitration Program
shall limit the right of any Party at any time to seek or use ancillary or
<PAGE>
preliminary judicial or non-judicial self help remedies for the purposes of
obtaining, perfecting, preserving, or foreclosing upon any personal property
in which there has been granted a security interest or lien by a Party in the
Documents. In Disputes involving indebtedness or other monetary obligations,
each Party agrees that the other Party may proceed against all liable
persons, jointly and severally against one or more of them, without impairing
rights against other liable persons. Nor shall a Party be required to join
the principal obligor or any other liable persons (e.g., sureties or
guarantors) in any proceeding against a particular person. A Party may
release or settle with one or more liable persons as the Party deems fit
without releasing or impairing rights to proceed against any persons not so
released. All statutes of limitation that would otherwise be applicable
shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing, of
that Party's desire to arbitrate a dispute; and each Party shall, within twenty
(20) days from the date such notification is received, select an arbitrator, and
those two arbitrators shall select a third arbitrator within ten (10) days
thereafter. The issues or claims in dispute shall be committed to writing,
separately stated and numbered, and each party's proposed answers or contentions
shall be signed below the questions. Failure by a party to select an arbitrator
within the prescribed time period shall serve as that Party's acquiescence and
acceptance of the other party's selection of arbitrator. The arbitrators shall
resolve all Disputes in accordance with the applicable substantive law. Any
Dispute shall be decided by a majority vote of three arbitrators, unless the
claim or amount in controversy does not exceed $100,000.00, in which case a
single arbitrator (who shall have authority to render a maximum award of
$100,000.00, including all damages of any kind, costs and fees) may decide the
Dispute. The arbitrators may grant any remedy or relief that the arbitrators
deem just and equitable and within the scope of this Arbitration Program. The
arbitrators may also grant such ancillary relief as is necessary to make
effective the award. In all arbitration proceedings the arbitrators shall make
specific and written findings of fact and conclusions of law. In all
arbitration proceedings in which the amount in controversy exceeds $100,000.00,
in the aggregate, the Parties shall have in addition to the statutory right to
seek vacation or modification of any award pursuant to applicable law, the right
to seek vacation or modification of any award that is based in whole, or in
part, on an incorrect or erroneous ruling of law by appeal to an appropriate
court having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must be
filed in a court having jurisdiction over the Dispute within 15 days from the
date the award in rendered. The arbitrators' findings of fact shall be binding
on all Parties and shall not be subject to further review except as otherwise
allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in writing
by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the
headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this
Arbitration Program shall survive any termination, amendment, or expiration of
the Documents, unless the Parties otherwise expressly agree in writing making
specific reference to this Arbitration Program. To the extent permitted by
applicable law, the arbitrator shall have the power to award recovery of all
costs and fees (including attorney's fees, administrative fees, and arbitrators'
fees) to the prevailing Party. This Arbitration Program may be amended,
changed, or modified only by a writing which specifically refers to this
Arbitration Program and which is signed by all the Parties. If any term,
covenant, condition or provision of the Arbitration Program is found to be
unlawful or invalid or unenforceable, such illegality or invalidity or
unenforceable shall not affect the legality, validity or enforceability of the
remaining parts of this Arbitration Program, and all such remaining parts hereof
shall be valid and enforceable and have full force and effect as if the illegal,
invalid or unenforceable part had not been included. Each Party agrees to keep
all Disputes and arbitration proceedings strictly confidential, except for
disclosures of information required in the ordinary course of business of the
Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be found
to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect. In lieu of such
provision, there shall be added automatically as part of this Agreement, a
provision as similar in its terms to such provision as may be possible and be
legal,
<PAGE>
valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
MICHAEL J. GERSHTENSON, D.D.S., P.C.
By: /s/ Michael J. Gershtenson, D.D.S.
---------------------------------------
Its: President
---------------------------------------
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
---------------------------------------
Its: Senior VP
---------------------------------------
/s/ Michael Gershtenson, D.D.S.
------------------------------------------
Michael Gershtenson, D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Merger Consideration
A Target Companies
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment
Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
4.16 Excluded Assets and Excluded Liabilities
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
MACK E. GREDER, D.D.S., P.C.
and
MACK GREDER, D.D.S.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Section 1. TERMS OF THE REORGANIZATION
1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . . . . . 2
1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . 4
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . . 9
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . . 12
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . . 13
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . 13
Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 14
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . . 14
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . 14
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . . 14
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . 15
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 15
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . . . . . 15
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . . 17
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . . . . 18
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . 19
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . . 20
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . . 21
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . . 22
14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.12 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.13 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.14 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.15 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.16 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and
executed to be effective August 20, 1997, is by and among PENTEGRA DENTAL
GROUP, INC., a Delaware corporation ("Pentegra"), MACK E. GREDER. D.D.S.,
P.C., a Nebraska professional corporation ("Company") and MACK GREDER,
D.D.S., shareholder of Company (referred to herein as "Shareholder" or
"Shareholders").
WITNESSETH:
WHEREAS, Company operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, the Boards of Directors of the Company and Pentegra have
determined that a reorganization between each of them is in the best
interests of their respective companies;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Company, the "Target Companies")
and simultaneously with the closing of the reorganization contemplated
herein, intends to consummate its initial public offering ("Initial Public
Offering") of shares of its common stock, par value $.01 per share ("Pentegra
Common Stock");
WHEREAS, it is intended for Federal income tax purposes that the
reorganization contemplated by this Agreement shall qualify as an
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering. . NOW THEREFORE, in
consideration of the mutual promises and covenants hereinafter set forth, and
for other good and valuable consideration, the sufficiency of which are
hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE REORGANIZATION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.2 MERGER. Subject to and upon the terms and conditions contained
herein, on the Closing Date, the Company shall be merged with and into
Pentegra (or its designated affiliate, in which case, the references herein
to Pentegra shall be to such designated affiliate and its shares of common
stock) in accordance with this Agreement and the separate corporate existence
of the Company shall thereupon cease
<PAGE>
("Merger"). Pentegra shall be the surviving corporation in the Merger
("Surviving Corporation") and shall continue to be governed by the laws of
the State of Delaware and the separate corporate existence of Pentegra with
all rights, privileges, powers, immunities and purposes shall continue
unaffected by the Merger. The Merger shall have the effects specified in the
Delaware General Corporation Law and the Nebraska Business Corporation Law.
If all the conditions to the Merger set forth herein shall have been
fulfilled or waived in accordance herewith and this Agreement shall not have
been terminated in accordance herewith, the parties hereto shall cause to be
properly executed and filed on the Closing Date Certificates of Merger for
the Company meeting the applicable legal requirements. The Mergers shall
become effective on the Closing Date or the filing of such documents, in
accordance with applicable law, or at such later time as the parties hereto
have agreed upon and designated in such merger filings.
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of
Incorporation and Bylaws of Pentegra shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation until duly amended in
accordance with their terms.
1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra
immediately prior to the effective date of the Merger shall be the directors
of the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal
in accordance with the Surviving Corporation's Certificate of Incorporation
and Bylaws. The persons who are officers of Pentegra immediately prior to
the effective date of the Merger shall be the officers of the Surviving
Corporation and shall hold their respective offices until their successors
have been duly elected or appointed and qualified or until their earlier
death, resignation or removal.
1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and
without any action on the part of the holder thereof, all shares of the
Company's common stock issued and outstanding on the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired and
shall cease to exist, and each holder of a certificate of representing shares
of Company common stock shall thereafter cease to have any rights with
respect to such shares except the right to receive the consideration set
forth on ANNEX I attached hereto (the "Merger Consideration"). Each share
of common stock of the Company held in treasury at the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired
without payment of any consideration therefor. On the effective date of the
Merger, each share of Pentegra Common Stock issued and outstanding shall, by
virtue of the Mergers, and without any action on the part of the holder
thereof, continue unchanged and remain outstanding as a share of validly
issued, fully paid and nonassessable share of Surviving Corporation common
stock.
1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the
Merger, the Shareholders, as the holders of a certificate or certificates
representing shares of Company common stock shall, upon surrender of such
certificate or certificates, receive the Merger Consideration, and until the
certificate or certificates of Company common stock shall have been
surrendered by the Shareholder and replaced by a certificate or certificates
representing Pentegra Common Stock (as set forth on ANNEX I), the certificate
or certificates of Company common stock shall, for all purposes be deemed to
evidence ownership of the number of shares of Pentegra Common Stock
determined in accordance with the provisions of ANNEX I. All shares of
Pentegra Common Stock issuable to the Shareholders in the Merger shall be
deemed for all purposes to have been issued by Pentegra on the Closing Date.
The Shareholders shall deliver to Pentegra at Closing the certificate or
certificates representing the Company common stock owned by them, duly
endorsed in blank by the Shareholders, or accompanied by duly executed blank
stock powers, and with all necessary transfer tax and other revenue stamps,
acquired at the Shareholder's expense, affixed and cancelled.
1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under
<PAGE>
any of the Assets or otherwise to carry out this Agreement, in return for the
consideration set forth in this Agreement, the Company and Shareholders shall
excecute and deliver all such deeds, bills of sale, assignments and
assurances and take and do all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under the Assets in Pentegra or otherwise to carry
out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional
corporation or association, as applicable, duly organized, validly existing
and in good standing under the laws of the State of Nebraska. Company has all
necessary corporate powers to own all of its assets and to carry on its
business as such business is now being conducted. Company does not own stock
in or control, directly or indirectly, any other corporation, association or
business organization, nor is Company a party to any joint venture or
partnership. The Shareholders are the sole shareholders of Company and own
all outstanding shares of capital stock free of all security interests,
claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each
share of Company's common stock has been legally and validly issued and fully
paid and nonassessable. No shares of capital stock of Company are owned by
Company in treasury. There are no outstanding (a) bonds, debentures, notes or
other obligations the holders of which have the right to vote with the
stockholders of Company on any matter, (b) securities of Company convertible
into equity interests in Company, or (c) commitments, options, rights or
warrants to issue any such equity interests in Company, to issue securities
of Company convertible into such equity interests, or to redeem any
securities of Company. No shares of capital stock of Company have been
issued or disposed of in violation of the preemptive rights, rights of first
refusal or similar rights of any of Company's stockholders. Company is not
required to qualify to do business as a foreign corporation in any other
state or jurisdiction by reason of its business, properties or activities in
or relating to such other state or jurisdiction. Company does not have any
assets, employees or offices in any state other than the state set forth in
the first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate
power to execute, deliver and perform this Agreement and all agreements and
other documents executed and delivered by it pursuant to this Agreement or to
be executed and delivered on the Closing Date, and has taken all action
required by law, its Articles or Certificate of Incorporation, its Bylaws or
otherwise, to authorize the execution, delivery and performance of this
Agreement and such related documents. Each Shareholder has the legal
capacity to enter into and perform this Agreement and the other agreements to
be executed and delivered in connection herewith. Company has obtained the
approval of its stockholders necessary to the consummation of the
transactions contemplated herein. This Agreement and all agreements and
documents executed and delivered in connection herewith have been, or will be
as of the Closing Date, duly executed and delivered by Company and
Shareholders, as appropriate, and constitute or will constitute the legal,
valid and binding obligations of Company and Shareholders, enforceable
against Company and Shareholders in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of
consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, violate any provision of the Articles or
Certificate of Incorporation or Bylaws of Company or any provisions of, or
result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or
decree to which Company or any Shareholder is a party or by which Company or
any Shareholder is bound, or violate any material restrictions of any kind to
which Company is subject, or result in any lien or encumbrance on any of
Company's assets or the Assets.
<PAGE>
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to
the knowledge of Company and Shareholders, threatened, which may result in
the revocation, cancellation or suspension, or any adverse modification, of
any such licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Company or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been declared or paid by Company on any of its capital stock
since the Balance Sheet Date. No repurchase of any of Company's capital
stock has been approved, effected or is pending, or is contemplated by
Company.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Company and all
amendments thereto have been delivered to Pentegra. The minute books of
Company contain accurate minutes of all meetings of and consents to actions
taken without meetings of the Board of Directors and stockholders of Company
since its formation. The books of account of Company have been kept
accurately in the ordinary course of business and the revenues, expenses,
assets and liabilities of Company have been properly recorded in such books.
2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any
related unaudited statements of income, retained earnings, schedule of
accounts receivable, accounts payable and accrued liabilities, and cash flows
for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Company as of
the dates and for the periods indicated and reflect all fixed and contingent
liabilities of Company.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Company or any Shareholder leases, as lessor or lessee,
real or personal property used in operating the Business, related to the
Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and
enforceable in accordance with their respective terms, and there is not under
any such lease any existing default by Company, as lessor or lessee, or any
condition or event of which any Shareholder or Company has knowledge which
with notice or lapse of time, or both, would constitute a default, in respect
of which Company or Shareholders have not taken adequate steps to cure such
default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Company and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances
set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to
<PAGE>
the Closing Date and evidence of such releases of liens and claims shall be
provided to Pentegra on the Closing Date and the Assets shall not be used to
satisfy such liens, claims or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Company, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Company has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Company, including the names of any entities from whom Company previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Company in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Company has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the name of each director and officer of Company
and the offices held by each, (b) the most recent payroll report of Company,
showing all current employees of Company and their current levels of
compensation, (c) promised increases in compensation of employees of Company
that have not yet been effected, (d) oral or written employment agreements,
consulting agreements or independent contractor agreements (and all
amendments thereto) to which Company is a party, copies of which have been
delivered to Pentegra, and (e) all employee manuals, materials, policies,
procedures and work-related rules, copies of which have been delivered to
Pentegra. Company is in compliance with all applicable laws, rules,
regulations and ordinances respecting employment and employment practices.
Company has not engaged in any unfair labor practice. There are no unfair
labor practices charges or complaints pending or threatened against Company,
and Company has never been a party to any agreement with any union, labor
organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the
Business nor any of the Assets is subject to any pending, nor does Company or
any Shareholder have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Company, any Shareholder, the Business, the Assets or the
transactions contemplated by this Agreement, and, to the knowledge of Company
and Shareholders, no basis for any such action exists, nor is there any legal
impediment of which Company or any Shareholder has knowledge to the continued
operation of its business or the use of the Assets in the ordinary course,
subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Company has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Company ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted or may be made
by any party thereto. Except as indicated on such Exhibits, there is not
under any such Contract any existing default
<PAGE>
by Company or any Shareholder, or any condition or event of which Company or
any Shareholder has knowledge which with notice or lapse of time, or both,
would constitute a default. Company and Shareholders have no knowledge of
any default by any other party to such Contracts. Company and Shareholders
have not received notice of the intention of any party to any Contract to
cancel or terminate any Contract and have no reason to believe that any
amendment or change to any Contract is contemplated by any party thereto.
Other than those contracts, obligations and commitments listed on EXHIBIT
2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material
written or oral agreement contract, lease or arrangement, including without
limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
the Company or Shareholders, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Company on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
<PAGE>
(d) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Company since the Balance Sheet
Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(j) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties,
assets or business or the Business or the Assets, or experienced any other
material adverse change in its financial condition, assets, prospects,
liabilities or business;
(n) Declared or paid a distribution, payment or dividend of any
kind on the capital stock of Company;
(o) Repurchased, approved any repurchase or agreed to repurchase
any of Company's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Company has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Company has not received any notice that any tax deficiency or
delinquency has been or may be asserted against Company. There are no
audits relating to taxes of Company pending or in process or, to the
knowledge of Company, threatened. Company is not currently the beneficiary of
any waiver of any statute of limitations in respect of taxes nor of any
extension of time within which to file any tax return or to pay any tax
assessment or deficiency. There are no liens or encumbrances relating to
taxes on or threatened against any of the assets of Company. Company has
withheld
<PAGE>
and paid all taxes required by law to have been withheld and paid by it.
Neither Company nor any predecessor of Company is or has been a party to any
tax allocation or sharing agreement or a member of an affiliated group of
corporations filing a consolidated Federal income tax return. Company has
delivered to Pentegra correct and complete copies of Company's three most
recently filed annual state, local and Federal income tax returns, together
with all examination reports and statements of deficiencies assessed against
or agreed to by Company during the three calendar year period preceding the
date of this Agreement. Company has neither made any payments, is obligated
to make any payments, or is a party to any agreement that under any
circumstance could obligate it to make any payments that will not be
deductible under Code section 280G.
(b) No Shareholder presently intends to dispose of any of the shares of
Pentegra Common Stock to be received hereunder nor is a party to any plan,
arrangement or agreement for the disposition of such shares. Company and
Shareholders have no knowledge, after due inquiry, of any such intent, plan,
arrangement or agreement by any Shareholder. Nothing contained herein shall
prohibit Shareholders from selling such shares of Pentegra Common Stock after
the designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated
by this Agreement which may be now or hereafter asserted against Pentegra,
Company or Company's shareholders resulting from any action taken by Company
or any Shareholder or their respective agents or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Company did not have, as of the Balance Sheet
Date, and has not incurred since that date and will not have incurred as of
the Closing Date, any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
other than those incurred in the ordinary course of business or as set forth
on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable
grounds to know, of any basis for the assertion against Company or any
Shareholder as of the Balance Sheet Date, of any claim or liability of any
nature in any amount not fully reflected or reserved against on the Balance
Sheet, or of any claim or liability of any nature arising since that date
other than those incurred in the ordinary course of business or contemplated
by this Agreement. All indebtedness of Company (including without
limitation, indebtedness for borrowed money, guaranties and capital lease
obligations) is described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed
professional of Company carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the
industry. Valid and enforceable policies in such amounts are outstanding and
duly in force and will remain duly in force through the Closing Date. All
such policies are described in EXHIBIT 2.20 attached hereto and true and
correct copies have been delivered to Pentegra. Neither Shareholders nor
Company have not received notice or other communication from the issuer of
any such insurance policy cancelling or amending such policy or threatening
to do so. Neither Company, nor any Shareholder nor any licensed professional
employee of Company has any outstanding claims, settlements or premiums owed
against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Company has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company
<PAGE>
Plan," and collectively "Company Plans") have been operated and administered
in all material respects in accordance with all applicable laws, rules and
regulations, including without limitation, ERISA, the Internal Revenue Code
of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment
Act of 1967, as amended, and the related rules and regulations adopted by
those Federal agencies responsible for the administration of such laws. No
act or failure to act by Company has resulted in a "prohibited transaction"
(as defined in ERISA) with respect to the Company Plans. No "reportable
event" (as defined in ERISA) has occurred with respect to any of the Company
Plans. Company has not previously made, is not currently making, and is not
obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Company Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at least equal to the
value of plan liabilities or (ii) the value of plan liabilities in excess of
plan assets is disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Company, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and
Company's licensed professional employees, and the conduct of the Business
and use of the Assets, have complied with all applicable laws, rules,
regulations and licensing requirements, including, without limitation, the
Federal Environmental Protection Act, the Occupational Safety and Health Act,
the Americans with Disabilities Act and any environmental laws and medical
waste laws, and there exist no violations by Company, any Shareholder or any
licensed professional employee of Company of any Federal, state or local law
or regulation. Company and Shareholders have not received any notice of a
violation of any Federal, state and local laws, regulations and ordinances
relating to the operations of the Business and Assets and no notice of any
pending inspection or violation of any such law, regulation or ordinance has
been received by Company.
2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed
professional employee or independent contractor of Company has timely filed
all claims or other reports required to be filed with respect to the purchase
of services by third-party payors, and all such claims or reports are
complete and accurate, and has no liability to any payor with respect
thereto. There are no pending appeals, overpayment determinations,
adjustments, challenges, audit, litigation or notices of intent to open
Medicare or Medicaid claim determinations or other reports required to be
filed by Company, any Shareholder and each licensed professional employee of
Company. Neither Company, nor any Shareholder, nor any licensed professional
employee of Company has been convicted of, or pled guilty or nolo contendere
to, patient abuse or negligence, or any other Medicare or Medicaid program
related offense and none has committed any offense which may serve as the
basis for suspension or exclusion from the Medicare and Medicaid programs or
any other third party payor program. With respect to payors, Company,
Shareholders and Company's licensed professional employees has not (a)
knowingly and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company
or Shareholders in this Agreement, and no Exhibit or certificate issued or
executed by, or information furnished by, officers or directors of Company or
any Shareholder and furnished or to be furnished to Pentegra pursuant hereto,
or in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a
<PAGE>
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Company has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Company, or their respective spouses,
children or affiliates, owns directly or indirectly, on an individual or
joint basis, any interest in, has a compensation or other financial
arrangement with, or serves as an officer or director of, any customer or
supplier or competitor of Company or any organization that has a material
contract or arrangement with Company.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Company's services which
accounted for more than 10% of revenues of Company in the preceding fiscal
year. Company has good relations with all such payors and other material
payors of Company and none of such payors has notified Company that it
intends to discontinue its relationship with Company or to deny any claims
submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Company and Shareholders as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon
<PAGE>
Pentegra. Other than as would not have a material adverse effect, there are
no proceedings pending or, to the knowledge of Pentegra, threatened, which
may result in the revocation, cancellation or suspension, or any adverse
modification, of any such licenses or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has knowledge to the continued operation of its business or the use
of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the reorganization contemplated
hereby will be as of the Closing Date duly and validly authorized by all
necessary corporate action on the part of Pentegra. The Pentegra Common
Stock to be issued in connection with the reorganization contemplated hereby,
when issued in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Company or any
Shareholder pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, agree that between the
date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall
use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Company
and Shareholders agree to complete the Exhibits hereto to be provided by them
in form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the
Business and use the Assets in the ordinary course. Company and Shareholders
shall not enter into any lease, contract, indebtedness, commitment, purchase
or sale or acquire or dispose of any capital asset relating to the Business
or the Assets except in the ordinary course of business. Company and
Shareholders shall use their best efforts to preserve the Business and Assets
intact and shall not take any action that would have an adverse effect on the
Business or Assets. Company and Shareholders shall use their best efforts to
preserve intact the
<PAGE>
relationships with payors, customers, suppliers, patients and others having
significant business relations with Company. Company and Shareholders shall
collect its receivables and pay its trade payables in the ordinary course of
business. Company and Shareholdes shall not introduce any new method of
management, operations or accounting.
4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra
and its authorized representatives access to, and make available for
inspection, all of the assets and business of Company, the Business and the
Assets, including employees, customers and suppliers and permit Pentegra and
its authorized representatives to inspect and make copies of all documents,
records and information with respect to the business or assets of Company,
the Business or the Assets as Pentegra or its representatives may request.
Company and Shareholders shall promptly notify Pentegra in writing of (a) any
notice or communication relating to a default or event that, with notice or
lapse of time or both, could become a default, under any contract, commitment
or obligation to which Company is a party or relating to the Business or the
Assets, and (b) any adverse change in Company's or the Business' financial
condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and
Shareholders shall use their best efforts to secure all necessary approvals
and consents of third parties to the consummation of the transactions
contemplated hereby, including consents described on EXHIBIT 2.4. Company
and Shareholders shall use their best efforts to obtain all licenses,
permits, approvals or other authorizations required under any law, rule,
regulation, or otherwise to provide the services of the Practice contemplated
by the Service Agreement and to conduct the intended business of the Practice
and operate the Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance
with the provisions hereof, Company and Shareholders shall not, and shall use
its best efforts to cause Company's employees, agents and representatives not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or
the making or implementation of any proposal or offer, including without
limitation, any proposal or offer to any Shareholder, with respect to a
merger, acquisition, consolidation or similar transaction involving, or the
purchase of all or any significant portion of the assets or any equity
securities of Company or engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person relating to such proposal or offer, and Company and Shareholders will
immediately cease any such activities, discussions or negotiations heretofore
conducted with respect to any of the foregoing. Company and Shareholders
shall immediately notify Pentegra if any such inquiries or proposals are
received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Company or any entity might have any liability whatsoever
arising from any insurance, pension plan, employment tax or similar
liability of Company to any employee or other person or entity (including,
without limitation, any Company Plan and any liability under employment
contracts with Company) allocable to services performed prior to the Closing
Date. Company and Shareholders acknowledge that the purpose and intent of
this covenant is to assure that Pentegra shall have no unfunded liability
whatsoever at any time after the Closing Date with respect to any of
Company's employees or similar persons or entities, including, without
limitation, any Company Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Company shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash
compensation of any Shareholder (other than in the ordinary course of
business) or other employee or an independent contractor of Company, adopt,
amend or terminate any compensation plan, employment agreement, independent
contractor agreement, employee policies and procedures or employee benefit
plan, take any action that could deplete the assets of any employee benefit,
or fail to pay any premium or contribution due or file any report with
respect to any employee benefit plan, or take any other actions with respect
to its employees or employee matters which might have an adverse effect
<PAGE>
upon Company, its business, assets or prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Company, nor will any repurchase of
any of Company's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders
shall use their best efforts to take, or cause to be taken, all actions
necessary to effect the reorganization contemplated hereby under applicable
law.
4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not
change in any material respect the tax or financial accounting methods or
practices followed by Company (including any material change in any
assumption underlying, or any method of calculating, any bad debt,
contingency or other reserve), except as may be required by law or generally
accepted accounting principles. Company and Shareholders will duly,
accurately and timely (without regard to any extensions of time) file all
returns, information statements and other documents relating to taxes of
Company required to be filed by it, and pay all taxes required to be paid by
it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Company hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Company and Shareholders covenant and agree that all of the
creditors with respect to the Business and the Assets will be paid in full by
Company prior to the Closing Date, except to extent that any liability to
such creditors is assumed by Pentegra pursuant to this Agreement. If
required by Pentegra, Company and Shareholders shall furnish Pentegra with
proof of payment of all creditors with respect to the Business and the
Assets. Notwithstanding the foregoing, Company and Shareholders may dispute
the validity or amount of any such creditor's claim without being deemed to
be in violation of this SECTION 4.11, provided that such dispute is in good
faith and does not unreasonably delay the resolution of the claim and
provided, further that Company and Shareholders agree to indemnify and bond
Pentegra for such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Company leases any of its premises from any Shareholder
or other affiliate of Company or any shareholder of Company, Pentegra shall
have entered into a building lease (the "Building Lease") with the owner of
such premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, (i) a five year
initial term plus three five-year renewal options, (ii) a lease rate equal to
the fair market value lease rate, as agreed to by Pentegra, and (iii) such
other provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with
all requests made by Pentegra for the purpose of allowing Pentegra to hire
those non-dentist employees of Company designated by Pentegra, such
employment to be effective as of the Closing Date. Notwithstanding the
above, Company and Shareholders shall remain liable under any Company Plans
for any claims incurred by any employees or their spouses or dependents, and
for all compensation, bonuses, benefits and other such items and other
liabilities related to Company's employees incurred by Company prior to the
Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all
employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall
be treated as "leased employees" (as defined in Code Section 414(n)) of
Company and shall be treated as Clinic employees for purposes of eligibility
and participation in Company Plans.
4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective
as of the Closing Date.
<PAGE>
4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a
limited liability company, partnership or other legal entity (the "Practice")
approved by Pentegra for the purpose of practicing dentistry and entering
into the Service Agreement. The Practice shall be duly organized, in
existing and in good standing under the laws of the State in which the
practice of dentistry is conducted by the Shareholders and the Practice. The
Practice shall have all necessary power to own all of its assets and to carry
on its business as such business is now being conducted. The Shareholders
shall be the sole member/shareholder/partner of the Practice and own all such
interests free of all security interests, claims, encumbrances and liens.
Each interest in the Practice shall be legally and validly issued and fully
paid and nonassessable. There shall be no outstanding (a) bonds, debentures,
notes or other obligations the holders of which have the right to vote with
the members/partners/shareholders of the Practice on any matter, (b)
securities of the Practice convertible into equity interests in the Practice,
or (c) commitments, options, rights or warrants to issue any such equity
interests in the Practice, to issue securities of the Practice convertible
into such equity interests, or to redeem any securities of the Practice. No
interests of the Practice shall have been issued or disposed of in violation
of the preemptive rights, rights of first refusal or similar rights of any of
the Practice's members/partners/shareholders. The Practice shall quality to
do business as a foreign entity in any other state or jurisdiction by reason
of its business, properties or activities in or relating to such other state
or jurisdiction. The Company shall have transferred the Excluded Assets set
forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to
assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for
equity interest in the Practice, and the Company shall have distributed such
equity interests in the Practice to the Shareholders.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation,
Bylaws/Regulations and minutes of the Practice and all amendments thereto of
the Practice shall have been delivered to Pentegra and shall be in form and
substance satisfactory to Pentegra. The minute books of the Practice shall
contain all accurate minutes of the meetings of and consents to actions taken
without meetings of the members\managers/partners/board of directors of the
Practice since its formation. The books of account of the Practice shall
have been kept accurately in the ordinary course of business and the
revenues, expenses, assets and liabilities of the Practice shall have been
properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements
and other documents to be executed and delivered by it pursuant to this
Agreement, including without limitation, the Service Agreement and each
Employment Agreement or to be executed and delivered on the Closing Date, and
has taken all action required by law, its Organization/Partnership
Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to
authorize the execution, delivery and performance of such documents. The
Service Agreement, the Employment Agreement and the other agreements
contemplated hereby shall have been duly executed and delivered by the
Practice and constitute or will constitute the legal, valid and binding
obligations of the Practice enforceable against the Practice in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of the
Service Agreement, the Employment Agreements and the other agreements
contemplated hereby will not violate any provision of the organizational
documents of the Practice or any provisions of, or result in the acceleration
of, any obligation under any mortgage, lien, lease, agreement, rent,
instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any
material restrictions of any kind to which the Practice is subject, or result
in any lien or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
<PAGE>
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and have filed with
the proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS.
Pentegra, Shareholders and Company agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall
cooperate to promptly prepare and file with the Securities Exchange
Commission ("SEC") the Registration Statement on Form S-1 (or other
appropriate Form) to be filed by Pentegra in connection with its Initial
Public Offering (including the prospectus constituting a part thereof, the
"Registration Statement"). Pentegra shall obtain all necessary state
securities laws or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement and the Company and Shareholders
shall furnish all information concerning Company and Shareholders as may be
reasonable requested in connection with any such action.
Company and Shareholder represent and warrant that none of the
information or documents supplied or to be supplied by it specifically for
inclusion in the Registration Statement, by exhibit or otherwise, will, at
the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act of 1933, 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, in
light of the circumstances under which they were made, not misleading.
Company and Shareholders shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.
Company and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by
Pentegra in connection with the preparation of the Registration Statement and
each amendment or supplement thereto, or any other statement, filing, notice
or application made by or on behalf of each such party or any of its
subsidiaries to any governmental entity in connection with the transactions
contemplated by the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
<PAGE>
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Company and Shareholders contained herein shall have been true and correct
in all respects when initially made and shall be true and correct in all
respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Company and Shareholders prior
to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Company shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Company, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service
Agreement"), in substantially the form attached hereto as EXHIBIT 7.7,
pursuant to which Pentegra will provide management services to the Practice.
Each Shareholder shall have executed and delivered a Guaranty Agreement in
substantially the form attached as EXHIBIT 4.10 of the Service Agreement
pursuant to which Shareholder shall, among other things, guaranty the
obligations of the Practice under the Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused
each shareholder of Company that has an existing employment agreement with
Company to have terminated his or her employment agreement with Company and
shall have executed an employment agreement ("Employment Agreement") with the
Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise
satisfactory to Company and Pentegra.
7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have
obtained all necessary government and other third-party approvals and
consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables
or payables between Company and its shareholders or affiliates and Company
shall not have any liabilities, including indebtedness, guaranties and
capital leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an
additional insured on their liability insurance program in accordance with
SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working
<PAGE>
capital of Company since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Company and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pentegra contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Company shall have received all documents, duly
executed in form satisfactory to Company and its counsel, referred to in
SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days
after requested by Pentegra, Company and Shareholders shall deliver to
Pentegra the following, all of which shall be in a form satisfactory to
counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel
for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or
letter agreement in form and substance mutually acceptable to the parties
hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
<PAGE>
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of Company
authorizing the execution, delivery and performance of this Agreement, the
Service Agreement, the Employment Agreements and all related documents and
agreements each certified by the Secretary as being true and correct copies
of the original thereof;
(d) executed merger certificate and/or plan as required by
applicable state law;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra and the original stock certificates
together with blank stock powers representing the outstanding shares of
Company common stock;
(f) certificates of the Shareholders and a duly authorized officer
of Company dated as of the Closing Date, (i) as to the truth and correctness
of the representations and warranties of Company and Shareholder contained
herein; (ii) as to the performance of and compliance by Company and
Shareholder with all covenants contained herein; and (iii) certifying that
all conditions precedent of Company and Shareholders to the Closing have been
satisfied;
(g) a certificate of the Secretary of Company certifying as to the
incumbency of the directors and officers of Company and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Company;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Company and any state of required
foreign qualification of Company establishing that Company is in existence
and is in good standing to transact business in its state of incorporation;
(i) an opinion of counsel to Company and Shareholder opining as to
the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Company, the enforceability of this Agreement and the other agreements and
documents to be executed in connection herewith, and other matters reasonably
requested by Pentegra;
(j) non-foreign affidavits executed by Company;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Company and Shareholders, the following, all of which shall
be in a form satisfactory to counsel to Company and Shareholders and shall be
held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending
Closing, pursuant to an escrow agreement or letter agreement in form and
substance mutually acceptable to the parties hereto:
(a) the Merger Consideration;
<PAGE>
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Company;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Company;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Company to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit attached hereto, any agreement executed pursuant hereto, and
any certificate executed and delivered by any party pursuant to the terms of
this Agreement, shall constitute representations and warranties of Company
and Shareholders, jointly and severally, or of Pentegra, as the case may be.
All such representations and warranties, and all representations and
warranties expressly labeled as such in this Agreement shall survive the date
of this Agreement and the Closing Date for a period of five (5) years
following the Closing Date, except that (i) the representations and
warranties with respect to environmental and medical waste laws and health
care laws and matters shall survive for a period of fifteen (15) years and
tax representations shall survive until one year after the expiration of the
applicable statute of limitations. Each party covenants with the other
parties not to make any claim with respect to such representations and
warranties, against any party after the date on which such survival period
shall terminate. No party shall be entitled to claim indemnity from any
other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has
timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the
case may be. Each party hereby releases, acquits and discharges the other
party from any and all claims and demands, actions and causes of action,
damages, costs, expenses and rights of setoff with respect to which the
notices required by SECTION 10.2, 10.3 or 10.4, as
<PAGE>
applicable, are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH
OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS
SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED
PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES,
ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED
TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM
OR BY REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR
TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION
10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND
SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS,
DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING,
INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT
APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST
ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS,
DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
<PAGE>
HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO
BE FURNISHED BY INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR
AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL
LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION
ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS
RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER
THE CLOSING DATE,
(E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY
RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A
RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH
THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS
SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS
SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE
REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO
MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
<PAGE>
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the
defense of such action or proceeding, such Indemnified Person shall notify
Indemnitor thereof. If any such action or other proceeding shall be brought
against any Indemnified Person, Indemnitor shall, upon written notice given
within a reasonable time following receipt by Indemnitor of such notice from
Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Company or any Shareholder giving
rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra
shall be entitled to offset the amount of damages incurred by it as a result
of such breach of warranty, representation, covenant or agreement against any
amounts payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Company
or any Shareholder contained in this Agreement or in any certificate or other
document executed and delivered by Company or any Shareholder pursuant to
this Agreement is or becomes untrue or breached in any material respect or if
Company or any Shareholder fails to comply in any material respect with any
covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
(c) at any time by Company or any Shareholder if any representation or
warranty of Pentegra contained in this Agreement or in any certificate or
other document executed and delivered by Pentegra pursuant to this Agreement
is or becomes untrue or breached in any material respect or if Pentegra fails
to comply in any material respect with any covenant or agreement contained
herein and such misrepresentation, noncompliance or breach is not cured,
waived or eliminated within twenty (20) days after receipt of written notice
thereof;
(d) by Pentegra, Shareholders or Company if the transaction contemplated
hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Company, that such termination is
<PAGE>
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares
of Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer
shall be treated as effective for any purpose or (b) engage in any
transaction, whether or not with respect to any shares of Pentegra Common
Stock or any interest therein, the intent or effect of which is to reduce the
risk of owning shares of Pentegra Common Stock. The certificates evidencing
the Pentegra Common Stock delivered to Company pursuant to the terms hereof
will bear a legend substantially in the form set forth below and containing
such other information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the
shares of Pentegra Common Stock to be delivered to Company pursuant to this
Agreement have not been and will not be registered under the Securities Act
of 1933 and may not be resold without compliance with the Securities Act of
1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to
this Agreement is being acquired solely for its own account, for investment
purposes only and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution. Each
Shareholder covenants, warrants and represents that none of the shares of
Pentegra Common Stock issued to it will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the Securities Act, as
amended, and the rules and regulations of the Securities Exchange Commission
and applicable state securities laws and regulations. All certificates
evidencing shares of Pentegra Common Stock shall bear the following legend in
addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock
shall bear any legend required by the securities or blue sky laws of any
state where Company resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the
economic risk of an investment in Pentegra Common Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and
have such knowledge and experience in financial and business matters that
they are capable of evaluating the merits and risks of the proposed
investment and therefore have the capacity to protect their own interests in
connection with the acquisition of the Pentegra Common Stock. Shareholders
and their representatives have had an adequate opportunity to ask questions
and receive answers from the officers of Pentegra concerning any and all
matters relating to the background and experience of the officers
<PAGE>
and directors of Pentegra, the plans for the operations of the business of
Pentegra, and any plans for additional acquisitions and the like.
Shareholders and their representatives have asked any and all questions in
the nature described in the preceding sentence and all questions have been
answered to their satisfaction. Shareholders are "accredited investors" as
defined in Regulation D of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Company and Shareholders agree that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally
through no fault of Company or Shareholders, (ii) disclosure is required by
law or the order of any governmental authority under color of law, provided,
that prior to disclosing any information pursuant to this clause (ii),
Company and Shareholders shall, if possible, give prior written notice
thereof to the other parties hereto, and provide such other parties hereto
with the opportunity to contest such disclosure, (iii) Company and
Shareholders reasonably believe that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party, or
(iv) Company and Shareholders are the sole and exclusive owner of such
confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Company or Shareholders of the provisions of this SECTION 13, Pentegra shall
be entitled to an injunction restraining Company and Shareholders from
disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Pentegra from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. The obligations of the parties under this SECTION 13 shall
survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement will qualify as a reorganization within the meaning of
Section 368(a) of the Code. The tax returns (and schedules thereto) of
Shareholders, Company and Pentegra shall be filed in a manner consistent
with such intention and Shareholders and Pentegra shall each provide the
other with such tax information, reports, returns or schedules as may be
reasonably required to assist the other in so reporting the transactions
contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
<PAGE>
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Company and Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Company or any Shareholder for services
rendered in connection with negotiating and closing the transactions
contemplated by this Agreement or the documents to be executed in connection
herewith, whether or not such costs or expenses are incurred before or after
the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Company.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
<PAGE>
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one and the
same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Company, be relieved from its obligations
to Company under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Company, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Company and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Company or may demand from Company, and Company agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Companys or Shareholders (hereinafter referred to as a "Party"), whether made
before or after the institution of any legal proceeding, any dispute among
the parties hereto in any way arising out of, related to, or in connection
with this Agreement (hereinafter a "Dispute"), shall be resolved by binding
arbitration in accordance with the terms of this Section (hereinafter the
"Arbitration Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
<PAGE>
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or foreclosing upon any
personal property in which there has been granted a security interest or lien
by a Party in the Documents. In Disputes involving indebtedness or other
monetary obligations, each Party agrees that the other Party may proceed
against all liable persons, jointly and severally against one or more of
them, without impairing rights against other liable persons. Nor shall a
Party be required to join the principal obligor or any other liable persons
(e.g., sureties or guarantors) in any proceeding against a particular person.
A Party may release or settle with one or more liable persons as the Party
deems fit without releasing or impairing rights to proceed against any
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoeniz,
Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the
<PAGE>
ordinary course of business of the Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
MACK E. GREDER, D.D.S., P.C.
By: /s/ Mack E. Greder, D.D.S.
-------------------------------------
Mack E. Greder, D.D.S., President
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
-------------------------------------
Its: Senior VP
-------------------------------------
/s/ Mack E. Greder
----------------------------------------
Mack Greder, D.D.S.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
Annex I Merger Consideration
A Target Companies
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
4.16 Excluded Assets and Excluded Liabilities
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(1) Form of Registration Rights Agreement
14.2 Addresses for Notice
</TABLE>
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
and
SALVATORE J. GUARNIERI, D.D.S.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . .2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . .3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . .3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . .3
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . .3
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . .4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . .7
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . .7
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . .8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . .8
3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . .8
Section 4. COVENANTS OF DENTIST.
4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . .9
<PAGE>
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . .9
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . .9
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . .9
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . 10
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 10
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 10
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . . . . . . 10
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 11
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 11
Section 6. COVENANTS OF PENTEGRA AND DENTIST
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 12
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 12
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 12
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 12
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8. DENTIST'S CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 13
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9. CLOSING DELIVERIES
<PAGE>
9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . . . . . . 16
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 17
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 19
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . 20
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . 21
14.12 NO RULE OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . . 21
14.13 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.14 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.15 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.16 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as
of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware
corporation ("Pentegra") and SALVATORE J. GUARNIERI, D.D.S. ("Dentist").
WITNESSETH:
WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires
to receive from Dentist, certain assets of Dentist;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Dentist, the "Target Companies");
WHEREAS, it is intended for Federal income tax purposes that the
transfers contemplated by this Agreement, the Other Agreements and Pentegra's
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an
exchange within the meaning of Section 351 of the Internal Revenue Code of
1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering. . NOW THEREFORE, in
consideration of the mutual promises and covenants hereinafter set forth, and
for other good and valuable consideration, the sufficiency of which are
hereby acknowledged, the parties agree as follows:
SECTION
1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P. or in such other manner as is mutually agreed upon by the parties, on
the day on which the Initial Public Offering of Pentegra Common Stock is
consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and
conditions contained herein, on the Closing Date, Dentist shall convey,
transfer, deliver and assign to Pentegra or any affiliate of Pentegra
designated by Pentegra all of Dentist's right, title and interest in and to
those certain assets described on EXHIBIT 1.1 attached hereto (individually,
"Asset", and collectively "Assets"), free and clear of all obligations,
security interests, claims, liens and encumbrances, except as specifically
assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof.
<PAGE>
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and contributed hereunder, and Dentist shall retain all of its
right, title and interest in and to, the assets not specifically transferred
hereunder, including without limitation, the assets described on EXHIBIT 1.2
(the "Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Dentist
contained herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Dentist the consideration specified
in ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b)
attached hereto to the extent that such obligations, commitments, liabilities
and indebtedness are current and not otherwise in default. (the "Assumed
Liabilities"). Notwithstanding any contrary provision contained herein,
Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i)
any liability, commitment or obligation or trade payable or indebtedness not
specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on
EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default
under such contracts, leases, commitments or obligations which occurred on or
before the Closing Date; (iii) any liability for any employee benefits
payable to employees of Dentist, including, but not limited to, liabilities
arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any
liability based upon or arising out of a violation of any antitrust or
similar restraint-of-trade laws by Dentist which may arise in connection with
agreements, contracts, commitments or orders for the sale of goods or
provision of services by Dentist reflected on the books of Dentist at or
prior to the Closing Date; (v) any liability based upon or arising out of any
tortious or wrongful actions of Dentist, any licensed professional employee
or independent contractor of Dentist, (vi) any liability for the payment of
any taxes of Dentist, including without limitation, transfer taxes and income
taxes arising from or by reason of the transactions contemplated by this
Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on
real property; nor (viii) any liability incurred or to be incurred pursuant
to any malpractice or other suits or actions pending against Dentist.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement, the
Dentist shall execute and deliver all such deeds, bills of sale, assignments
and assurances and take and do all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under the Assets in Pentegra or otherwise to carry
out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
Dentist hereby represents and warrants to Pentegra as follows:
2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the
State of New York. Dentist does not have any assets, employees or offices
relating to the Business in any state other than the state set forth in the
first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into
and perform this Agreement and the other agreements to be executed and
delivered in connection herewith. This Agreement and all agreements and
documents executed and delivered in connection herewith have been, or will be
as of the Closing Date, duly executed and delivered by Dentist and constitute
or will constitute the legal, valid and
<PAGE>
binding obligations of Dentist in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of
consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, result in the acceleration of, any obligation
under any mortgage, lien, lease, agreement, rent, instrument, order,
arbitration award, judgment or decree to which Dentist is a party or by which
Dentist is bound, or violate any material restrictions of any kind to which
Dentist is subject, or result in any lien or encumbrance on any of the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to
the knowledge of Dentist, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Dentist.
2.5 [INTENTIONALLY DELETED].
2.6 [INTENTIONALLY DELETED].
2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for the Business for
its prior two full fiscal years, as well as copies of its unaudited balance
sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance
Sheet" and the latest date thereof shall be referred to as the "Balance Sheet
Date") and any related unaudited statements of income, retained earnings,
schedule of accounts receivable, accounts payable and accrued liabilities,
and cash flows for the twelve months then ended (collectively, with the
related notes thereto, the "Financial Statements"). The Financial Statements
fairly present the financial condition and results of operations of the
Business as of the dates and for the periods indicated and reflect all fixed
and contingent liabilities of Dentist relating to the Business.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Dentist leases, as lessor or lessee, real or personal
property used in operating the Business or related to the Assets. All such
leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with
their respective terms, and there is not under any such lease any existing
default by Dentist, as lessor or lessee, or any condition or event of which
Dentist has knowledge which with notice or lapse of time, or both, would
constitute a default, in respect of which Dentist has not taken adequate
steps to cure such default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Dentist has no knowledge of any
latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances
set forth on
<PAGE>
EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to
be released or terminated prior to the Closing Date and evidence of such
releases of liens and claims shall be provided to Pentegra on the Closing
Date and the Assets shall not be used to satisfy such liens, claims or
encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Dentist, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Dentist has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items which are used by the
Dentist in the Business. Set forth in EXHIBIT 2.12 is a listing of all
names of all predecessor companies of Dentist relating to the business of
dentistry, including the names of any entities from whom Dentist previously
acquired significant assets related to the business of dentistry. Except for
off-the-shelf software licenses and except as set forth on EXHIBIT 2.12,
Dentist is not a licensee in respect of any patents, trademarks, service
marks, trade names, copyrights or applications therefor, or manufacturing
processes, formulas or trade secrets or similar items and no such licenses
are necessary for the conduct of the Business or the use of the Assets. No
claim is pending or has been made to the effect that the Assets or the
present or past operations of Dentist in connection with the Assets or
Business infringe upon or conflict with the asserted rights of others to any
patents, patent rights, manufacturing processes, trade names, trademarks,
service marks, inventions, licenses, specialized treatment protocols,
copyrights, formulas, know-how and trade secrets. Dentist has the sole and
exclusive right to use all Assets constituting proprietary rights without
infringing or violating the rights of any third parties and no consents of
any third parties are required for the use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the most recent payroll report of Dentist, showing
all current employees of Dentist relating to the Business or the practice of
dentistry and their current levels of compensation, (b) promised increases in
compensation of employees of Dentist relating to the Business or the practice
of dentistry that have not yet been effected, (c) oral or written employment
agreements, consulting agreements or independent contractor agreements (and
all amendments thereto) to which Dentist is a party and which relate to the
Business, copies of which have been delivered to Pentegra, and (d) all
employee manuals, materials, policies, procedures and work-related rules,
copies of which have been delivered to Pentegra. Dentist is in compliance
with all applicable laws, rules, regulations and ordinances respecting
employment and employment practices. Dentist has not engaged in any unfair
labor practice. There are no unfair labor practices charges or complaints
pending or threatened against Dentist, and Dentist has never been a party to
any agreement with any union, labor organization or collective bargaining
unit.
2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the
Assets is subject to any pending, nor does Dentist have knowledge of any
threatened, litigation, governmental investigation, condemnation or other
proceeding against or relating to or affecting Dentist, the Business, the
Assets or the transactions contemplated by this Agreement, and, to the
knowledge of Dentist, no basis for any such action exists, nor is there any
legal impediment of which Dentist has knowledge to the continued operation of
its business or the use of the Assets in the ordinary course, subject to
consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Dentist ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force
<PAGE>
and effect, and no defenses, offsets or counterclaims have been asserted by
any party thereto. Except as indicated on such Exhibits, there is not under
any such Contract any existing default by Dentist, or any condition or event
of which Dentist has knowledge which with notice or lapse of time, or both,
would constitute a default by Dentist. Dentist has no knowledge of any
default by any other party to such Contracts. Dentist has not received
notice of the intention of any party to any Contract to cancel or terminate
any Contract and has no reason to believe that any amendment or change to any
Contract is contemplated by any party thereto. Other than those contracts,
obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT
2.15, Dentist is not a party to any material written or oral agreement,
contract, lease or arrangement relating to the Assets or the Business,
including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
the Dentist, oral or written, that provide for prepayments or deferred
installment payments (other than in the ordinary course of business
consistent with past practices); or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Dentist on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16,
Dentist has not, since the Balance Sheet Date and in connection with the
Business:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(c) Made any payments to or loaned any money to any person or
entity other than in the ordinary
<PAGE>
course of business;
(d) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(e) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Dentist since the Balance Sheet
Date;
(f) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(g) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(h) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(i) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(j) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(k) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting the Business or the Assets,
or experienced any other material adverse change in the financial condition,
assets, prospects, liabilities or business of the Business; or
(l) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Dentist has not received any notice that any tax deficiency or
delinquency has been or may be asserted against Dentist. There are no
audits relating to taxes of Dentist pending or in process or, to the
knowledge of Dentist, threatened. Dentist is not currently the beneficiary of
any waiver of any statute of limitations in respect of taxes nor of any
extension of time within which to file any tax return or to pay any tax
assessment or deficiency. There are no liens or encumbrances relating to
taxes on or threatened against any of the Assets. Dentist has withheld and
paid all taxes required by law to have been withheld and paid by it. Dentist
is not and has not been a party to any tax allocation or sharing agreement or
a member of an affiliated group of corporations filing a consolidated Federal
income tax return. Dentist has delivered to Pentegra correct and complete
copies of Dentist's three most recently filed annual state, local and Federal
income tax returns, together with all examination reports and statements of
deficiencies assessed against or agreed to by Dentist during the three
calendar year period preceding the date of this Agreement. Dentist has
neither made any payments, is obligated to make any payments, or is a party
to any agreement that under any circumstance could obligate it to make any
payments that will not be deductible under Code section 280G.
<PAGE>
(b) Dentist does not intend to dispose of any of the shares of Pentegra
Common Stock to be received hereunder and is not a party to any plan,
arrangement or agreement for the disposition of such shares. Nothing
contained herein shall prohibit Dentist from selling such shares of Pentegra
Common Stock after the designated holding period and in accordance with
SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated
by this Agreement which may be now or hereafter asserted against Pentegra,
Dentist resulting from any action taken by Dentist or their respective agents
or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet or as set forth on EXHIBIT 2.19, Dentist did not
have, as of the Balance Sheet Date, and has not incurred since that date and
will not have incurred as of the Closing Date, any liabilities or obligations
of any nature related to the Business, whether accrued, absolute, contingent
or otherwise, and whether due or to become due, other than those incurred in
the ordinary course of business of the Business. Dentist does not know, or
have reasonable grounds to know, of any basis for the assertion against
Dentist as of the Balance Sheet Date, of any claim or liability of any nature
in any amount not fully reflected or reserved against on the Balance Sheet,
or of any claim or liability of any nature arising since that date other than
those incurred in the ordinary course of business or contemplated by this
Agreement. All indebtedness of Dentist related to the Business (including
without limitation, indebtedness for borrowed money, guaranties and capital
lease obligations) is included on the Balance Sheet or is described on
EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Dentist and each licensed professional of
Dentist carries property, liability, malpractice, workers' compensation and
such other types of insurance as is customary in the industry. Valid and
enforceable policies in such amounts are outstanding and duly in force and
will remain duly in force through the Closing Date. All such policies are
described in EXHIBIT 2.20 attached hereto and true and correct copies have
been delivered to Pentegra. Dentist has not received notice or other
communication from the issuer of any such insurance policy canceling or
amending such policy or threatening to do so. Neither Dentist nor any
licensed professional employee of Dentist has any outstanding claims,
settlements or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Dentist has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist
Plan," and collectively "Dentist Plans") have been operated and administered
in all material respects in accordance with all applicable laws, rules and
regulations, including without limitation, ERISA, the Internal Revenue Code
of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment
Act of 1967, as amended, and the related rules and regulations adopted by
those Federal agencies responsible for the administration of such laws. No
act or failure to act by Dentist has resulted in a "prohibited transaction"
(as defined in ERISA) with respect to the Dentist Plans. No "reportable
event" (as defined in ERISA) has occurred with respect to any of the Dentist
Plans. Dentist has not previously made, is not currently making, and is not
obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Dentist Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at least equal to the
value of plan liabilities or (ii) the value of plan liabilities in excess of
plan assets is disclosed on the Balance Sheet, all as of the Closing Date.
<PAGE>
2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Dentist, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed
professional employees, and the conduct of the Business and use of the
Assets, have complied with all applicable laws, rules, regulations and
licensing requirements, including, without limitation, the Federal
Environmental Protection Act, the Occupational Safety and Health Act, the
Americans with Disabilities Act and any environmental laws and medical waste
laws, and there exist no violations by Dentist or any licensed professional
employee of Dentist of any Federal, state or local law or regulation.
Dentist has not received any notice of a violation of any Federal, state and
local laws, regulations and ordinances relating to the operations of the
Business and Assets and no notice of any pending inspection or violation of
any such law, regulation or ordinance has been received by Dentist.
2.24 THIRD PARTY PAYORS. Dentist and each licensed professional
employee or independent contractor of Dentist has timely filed all claims or
other reports required to be filed with respect to the purchase of services
by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are
no pending appeals, overpayment determinations, adjustments, challenges,
audit, litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Dentist and each
licensed professional employee of Dentist. Neither Dentist nor any licensed
professional employee of Dentist has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Dentist and Dentist's licensed professional employees has not (a) knowingly
and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist
in this Agreement, and no Exhibit or certificate issued or executed by, or
information furnished by Dentist or to be furnished by Dentist to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Dentist has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer
or family member of Dentist, or their respective spouses, children or
affiliates, and to the best of Dentist's knowledge, no employee of dentist,
or such employee's respective spouse, childrenor affiliates, owns directly or
indirectly, on an individual or joint basis, any interest in, has a
compensation or other financial arrangement with, or serves as an officer or
director of, any customer or supplier or competitor of the Business or any
organization that has a material contract or arrangement with Dentist
relating to the Business.
<PAGE>
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Dentist's services which
accounted for more than 10% of revenues of the Business in the preceding
fiscal year. Dentist has good relations with all such payors and other
material payors of the Business and none of such payors has notified Dentist
that it intends to discontinue its relationship with Dentist or to deny any
claims submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Dentist as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Pentegra or waivers
thereof in all jurisdictions where Pentegra is or will perform services, have
been duly obtained and are in full force and effect, except as would not have
a material adverse effect upon Pentegra. Other than as would not have a
material adverse effect, there are no proceedings pending or, to the
knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has knowledge to the continued operation of its business or the use
of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required
<PAGE>
to have been filed by it, and has paid all taxes (including any interest,
penalty or additions thereto) required to have been paid by it, other than as
would not have a material adverse effect. Pentegra has not received any
notice that any tax deficiency or delinquency has been or may be asserted
against Pentegra. There are no audits relating to taxes of Pentegra pending
or in process or, to the knowledge of Pentegra, threatened. Pentegra is not
currently the beneficiary of any waiver of any statute of limitations in
respect of taxes nor of any extension of time within which to file any tax
return or to pay any tax assessment or deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Dentist pursuant
hereto, or in connection with the transactions contemplated hereby, contains
or will contain any untrue statement of a material fact, or omits or will
omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
SECTION 4. COVENANTS OF DENTIST.
Dentist agrees that between the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and conditions. Dentist agrees to complete the
Exhibits hereto to be provided by him in form and substance satisfactory to
Pentegra.
4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the
Assets in the ordinary course. Dentist shall not enter into any lease,
contract, indebtedness, commitment, purchase or sale or acquire or dispose of
any capital asset relating to the Business or the Assets except in the
ordinary course of business. Dentist shall use his best efforts to preserve
the Business and Assets intact and shall not take any action that would have
a material adverse effect on the Business or Assets. Dentist shall use his
best efforts to preserve intact the relationships with payors, customers,
suppliers, patients and others having significant business relations with
Dentist. Dentist shall collect its receivables and pay its trade payables in
the ordinary course of business. Dentist shall not introduce any new method
of management, operations or accounting.
4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized
representatives access to, and make available for inspection, all of the
assets and business of Dentist as the same relates to the Business or the
Assets, including employees, customers and suppliers and permit Pentegra and
its authorized representatives to inspect and make copies of all documents,
records and information with respect to the Business or the Assets, as
Pentegra or its representatives may request. Dentist shall promptly notify
Pentegra in writing of (a) any notice or communication relating to a default
or event that, with notice or lapse of time or both, could become a default,
under any contract, commitment or obligation to which Dentist is a party or
relating to the Business or the Assets, and (b) any adverse change in
Dentist's or the Business' financial
<PAGE>
condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall
use his best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby,
including consents described on EXHIBIT 2.4. Dentist shall use his best
efforts to obtain all licenses, permits, approvals or other authorizations
required under any law, rule, regulation, or otherwise to provide the
services of the Practice contemplated by the Service Agreement and to conduct
the intended business of the Practice and operate the Business and use the
Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance
with the provisions hereof, Dentist shall not, and shall use its best efforts
to cause Dentist's employees, agents and representatives not to, initiate,
solicit or encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer, including without limitation, any
proposal or offer to the Dentist, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of Dentist or
engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to
such proposal or offer, and Dentist will immediately cease any such
activities, discussions or negotiations heretofore conducted with respect to
any of the foregoing. Dentist shall immediately notify Pentegra if any such
inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Dentist or any entity might have any liability whatsoever
arising from any insurance, pension plan, employment tax or similar
liability of Dentist to any employee or other person or entity (including,
without limitation, any Dentist Plan and any liability under employment
contracts with Dentist) allocable to services performed prior to the Closing
Date. Dentist acknowledges that the purpose and intent of this covenant is
to assure that Pentegra shall have no liability whatsoever at any time after
the Closing Date with respect to any of Dentist's employees or similar
persons or entities, including, without limitation any Dentist Plan, for the
period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash
compensation of the Dentist (other than in the ordinary course of business)
or other employee or an independent contractor of Dentist, adopt, amend or
terminate any compensation plan, employment agreement, independent contractor
agreement, employee policies and procedures or employee benefit plan, take
any action that could deplete the assets of any employee benefit, or fail to
pay any premium or contribution due or file any report with respect to any
employee benefit plan, or take any other actions with respect to its
employees or employee matters which might have an adverse effect upon
Dentist, the Business or the Assets.
4.8 [INTENTIONALLY OMITTED].
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best
efforts to take, or cause to be taken, all actions necessary to effect the
acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material
respect the tax or financial accounting methods or practices followed by
Dentist (including any material change in any assumption underlying, or any
method of calculating, any bad debt, contingency or other reserve), except as
may be required by law or generally accepted accounting principles. Dentist
will duly, accurately and timely (without regard to any extensions of time)
file all returns, information statements and other documents relating to
taxes of Dentist required to be filed by it, and pay all taxes required to be
paid by it, on or before the Closing Date.
<PAGE>
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby
waive any compliance with the applicable state Bulk Transfers Act, if any.
Dentist covenants and agrees that all of the creditors with respect to the
Business and the Assets will be paid in full by Dentist prior to the Closing
Date, except to extent that any liability to such creditors is assumed by
Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall
furnish Pentegra with proof of payment of all creditors with respect to the
Business and the Assets. Notwithstanding the foregoing, Dentist may dispute
the validity or amount of any such creditor's claim without being deemed to
be in violation of this SECTION 4.11, provided that such dispute is in good
faith and does not unreasonably delay the resolution of the claim and
provided, further that Dentist agrees to indemnify Pentegra for such amounts
as is satisfactory to Pentegra.
4.12 LEASE. If Dentist leases any of its premises from the Dentist or
other affiliate of Dentist, Pentegra shall have entered into a building lease
(the "Building Lease") with the owner of such premises on terms and
conditions satisfactory to Pentegra, the terms and conditions of which shall
include, without limitation, (i) a five year initial term plus three
five-year renewal options, (ii) a lease rate equal to the fair market value
lease rate, as agreed to by Pentegra, and (iii) such other provisions to be
acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made
by Pentegra for the purpose of allowing Pentegra to hire those non-dental
employees of Dentist designated by Pentegra, such employment to be effective
as of the Closing Date. Notwithstanding the above, Dentist shall remain
liable under any Dentist Plans for any claims incurred by any employees or
their spouses or dependents, and for all compensation, bonuses, benefits and
other such items and other liabilities related to Dentist's employees
incurred by Dentist prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all
employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall
be treated as "leased employees" (as defined in Code Section 414(n)) of
Dentist and shall be treated as Clinic employees for purposes of eligibility
and participation in Dentist Plans.
4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective
as of the Closing Date.
4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited
liability company, partnership or other legal entity (the "Practice")
approved by Pentegra for the purpose of practicing dentistry and entering
into the Service Agreement. The Practice shall be duly organized, in
existing and in good standing under the laws of the State in which the
Dentist and the Practice are to practice dentistry. The Practice shall have
all necessary power to own all of its assets and to carry on its business as
such business is now being conducted. The Dentist shall be the sole
member/shareholder/partner of the Practice and own all such interests free of
all security interests, claims, encumbrances and liens. Each interest in the
Practice shall be legally and validly issued and fully paid and
nonassessable. There shall be no outstanding (a) bonds, debentures, notes or
other obligations the holders of which have the right to vote with the
members/partners/shareholders of the Practice on any matter, (b) securities
of the Practice convertible into equity interests in the Practice, or (c)
commitments, options, rights or warrants to issue any such equity interests
in the Practice, to issue securities of the Practice convertible into such
equity interests, or to redeem any securities of the Practice. No interests
of the Practice shall have been issued or disposed of in violation of the
preemptive rights, rights of first refusal or similar rights of any of the
Practice's members/partners/shareholders. The Practice shall qualify to do
business as a foreign entity in any other state or jurisdiction by reason of
its business, properties or activities in or relating to such other state or
jurisdiction.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation,
Bylaws/Regulations and minutes of the Practice and all amendments thereto of
the Practice shall have been delivered to Pentegra and shall be in form and
substance reasonably
<PAGE>
satisfactory to Pentegra. The minute books of the Practice shall contain all
accurate minutes of the meetings of and consents to actions taken without
meetings of the members\managers/partners/board of directors of the Practice
since its formation. The books of account of the Practice shall have been
kept accurately in the ordinary course of business and the revenues,
expenses, assets and liabilities of the Practice shall have been properly
recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements
and other documents to be executed and delivered by it pursuant to this
Agreement, including without limitation, the Service Agreement and each
Employment Agreement or to be executed and delivered on the Closing Date, and
has taken all action required by law, its Organization/Partnership
Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to
authorize the execution, delivery and performance of such documents. The
Service Agreement, the Employment Agreement and the other agreements
contemplated hereby shall have been duly executed and delivered by the
Practice and constitute or will constitute the legal, valid and binding
obligations of the Practice enforceable against the Practice in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of the
Service Agreement, the Employment Agreements and the other agreements
contemplated hereby will not violate any provision of the organizational
documents of the Practice or any provisions of, or result in the acceleration
of, any obligation under any mortgage, lien, lease, agreement, rent,
instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any
material restrictions of any kind to which the Practice is subject, or result
in any lien or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and has filed with
the proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND DENTIST.
Pentegra and Dentist agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, at its sole cost and expense,
shall promptly prepare and file with the Securities and Exchange Commission
("SEC") the Registration Statement on Form S-1 (or other
<PAGE>
appropriate Form) to be filed by Pentegra in connection with its Initial
Public Offering (including the prospectus constituting a part thereof, the
"Registration Statement"). Pentegra, at its sole cost and expense, shall
obtain all necessary state securities laws or "Blue Sky" permits and
approvals required to carry out the transactions contemplated by this
Agreement and the Dentist shall furnish all information concerning Dentist as
may be reasonable requested in connection with any such action.
Dentist represents and warrants that none of the information or documents
supplied or to be supplied by it specifically for inclusion in the
Registration Statement, by exhibit or otherwise, will, at the time the
Registration Statement and each amendment or supplement thereto, if any,
becomes effective under the Securities Act of 1933, contain any untrue
statement of a material fact or omit to state any mateial fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Dentist shall be
entitled to review the Registration Statement and each amendment thereto, if
any, prior to the time each becomes effective under the Securities Act of
1933.
Dentist shall furnish Pentegra will all information concerning itself and
such other matters as may be reasonable requested by Pentegra in connection
with the preparation of the Registration Statement and each amendment or
supplement thereto, or any other statement, filing, notice or application
made by or on behalf of each such party or any of its subsidiaries to any
governmental entity in connection with the transactions contemplated by the
Other Agreements or this Agreement.
6.2 SALES TAX. Notwithstanding any provision herein to the contrary,
Pentegra hereby covenants and agrees to pay any and all sales and/or use
taxes due and owing as a result of the transactions contemplated by this
Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Dentist contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied
with all covenants and conditions required by this Agreement to be performed
and complied with by Dentist prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of the Business or Assets shall have occurred since the Balance
Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of the Business and the Assets, the results of which shall be
satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
<PAGE>
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service
Agreement"), in substantially the form attached hereto as EXHIBIT 7.7,
pursuant to which Pentegra will provide management services to the Practice.
Dentist shall have executed and delivered a Guaranty Agreement in
substantially the form attached as EXHIBIT 4.10 of the Service Agreement
pursuant to which Dentist shall, among other things, guaranty the obligations
of the Practice under the Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her
employment agreement and executed an employment agreement ("Employment
Agreement") with the Practice in form and substance attached hereto as
EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra.
7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary
government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables
or payables between Dentist and its affiliates relating to the Business or
Assets, and Dentist shall not have any liabilities relating to the Business,
including indebtedness, guaranties and capital leases, that are not set forth
on EXHIBIT 2.19.
7.12 INSURANCE. Dentist shall have named Pentegra as an additional
insured on its liability insurance program in accordance with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Dentist since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. The Registration Statement shall have become
effective under the Securities Act (the "Effective Date") 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. At or prior to the date that the Registration
Statement is declared effective by the SEC, Pentegra shall have received all
state securities and "Blue Sky" permits necessary to consummate the
transactions contemplated hereby. The Pentegra Common Stock shall have been
approved for listing on Nasdaq or other exchange selected by Pentegra,
subject only to official notification of issuance.
SECTION 8. DENTIST'S CONDITIONS PRECEDENT.
The obligations of Dentist hereunder are subject to fulfillment at or
prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pentegra contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have
<PAGE>
been threatened orally or in writing, asserted, instituted or entered to
restrain or prohibit the carrying out of the transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly
executed in form satisfactory to Dentist and its counsel, referred to in
SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF DENTIST. Within five business days after requested by
Pentegra, Dentist shall deliver to Pentegra the following, all of which shall
be in a form reasonably satisfactory to counsel to Pentegra and shall be held
by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing,
pursuant to an escrow agreement or letter agreement in form and substance
mutually acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a bill of sale conveying the Assets to Pentegra;
(d) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(e) certificates of Dentist dated as of the Closing Date, (i) as to
the truth and correctness of the representations and warranties of Dentist
contained herein; (ii) as to the performance of and compliance by Dentist
with all covenants contained herein; and (iii) certifying that all conditions
precedent of Dentist to the Closing have been satisfied;
(f) an opinion of counsel to Dentist opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Dentist, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Pentegra;
(g) non-foreign affidavits executed by Dentist;
(h) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(i) an executed Registration Rights Agreement between Pentegra and
Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
<PAGE>
(j) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Dentist the following, all of which shall be in a form
reasonably satisfactory to counsel to Dentist and shall be held by Jackson &
Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to
an escrow agreement or letter agreement in form and substance mutually
acceptable to the parties hereto:
(a) the Acquisition Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Dentist;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Dentist;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Dentist to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit attached hereto, any agreement executed pursuant hereto, and
any certificate executed and delivered by any party pursuant to the terms of
this Agreement, shall constitute representations and warranties of Dentist or
of Pentegra, as the case may be. All such representations and warranties,
and all representations and warranties expressly labeled as such in this
Agreement shall survive the date of this Agreement and the Closing Date for a
period of three (3) years following the Closing Date, except that (i) the
representations and warranties with
<PAGE>
respect to environmental and medical waste laws and health care laws and
matters shall survive for a period of fifteen (15) years and tax
representations shall survive until one year after the expiration of the
applicable statute of limitations. Each party covenants with the other
parties not to make any claim with respect to such representations and
warranties, against any party after the date on which such survival period
shall terminate. No party shall be entitled to claim indemnity from any other
party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely
given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case
may be. Each party hereby releases, acquits and discharges the other party
from any and all claims and demands, actions and causes of action, damages,
costs, expenses and rights of setoff with respect to which the notices
required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely
provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE
EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND
AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS,
DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION
10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS,
SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND
EXPENSES (INCLUDING, BUT NOT LIMITED TO,
<PAGE>
REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR
BY REASON OF OR RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER,
(B) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS PRIOR TO THE
CLOSING DATE,
(C) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS AND AFFILIATES (OTHER THAN PENTEGRA) OF STATE OR FEDERAL
LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION
ARISING OUT OF OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS
SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(D) TAXES (OTHER THAN SALES AND USE TAXES) OF DENTIST OR ANY OTHER
PERSON OR ENTITY RELATED TO OR AFFILIATED WITH DENTIST ARISING FROM OR AS A
RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(E) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION,
PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR
THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(F) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(G) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
(H) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED
TO PENTEGRA OR ITS COUNSEL IN WRITING BY THE DENTIST SPECIFICALLY FOR
INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY
PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT
THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO
STATE THEREIN A MATERIAL FACT RELATING TO DENTIST REQUIRED TO BE STATED
THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
<PAGE>
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the
defense of such action or proceeding, such Indemnified Person shall notify
Indemnitor thereof. If any such action or other proceeding shall be brought
against any Indemnified Person, Indemnitor shall, upon written notice given
within a reasonable time following receipt by Indemnitor of such notice from
Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.
Except with respect to the failure of Pentegra to satisfy the payment of the
Acquisition Consideration, the parties hereto hereby acknowledge and agree
that the indemnification rights of the parties under this Section 10 and
equitable remedies, including without limitation, injunctive relief,
represent the sole and exclusive remedies that the parties hereto have with
respect to the breach of any representation, warranty or covenant set forth
in this Agreement.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Dentist giving rise to
indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be
entitled to offset the amount of damages incurred by it as a result of such
breach of warranty, representation, covenant or agreement against any amounts
payable by Pentegra, including the amounts payable under the Service
Agreement. In the event of any breach of warranty, representation, covenant
or agreement by Pentegra giving rise to indemnification under Section 10.2 or
10.4 hereof, Dentist shall be entitled to offset the amount of damages
actually incurred by it as a result of such breach of a warranty,
representation or covenant or agreement against any amounts payable by
Dentist or the Prractice, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Dentist
contained in this Agreement or in any certificate or other document executed
and delivered by Dentist pursuant to this Agreement is or becomes untrue or
breached in any material respect or if Dentist fails to comply in any
material respect with any covenant or agreement contained herein, and any
such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
(c) at any time by Dentist if any representation or warranty of Pentegra
contained in this Agreement or in any certificate or other document executed
and delivered by Pentegra pursuant to this Agreement is or
<PAGE>
becomes untrue or breached in any material respect or if Pentegra fails to
comply in any material respect with any covenant or agreement contained
herein and such misrepresentation, noncompliance or breach is not cured,
waived or eliminated within twenty (20) days after receipt of written notice
thereof;
(d) by Pentegra or Dentist if the transaction contemplated hereby shall
not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Dentist, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares
of Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer
shall be treated as effective for any purpose or (b) engage in any
transaction, whether or not with respect to any shares of Pentegra Common
Stock or any interest therein, the intent or effect of which is to reduce the
risk of owning shares of Pentegra Common Stock. The certificates evidencing
the Pentegra Common Stock delivered to Dentist pursuant to the terms hereof
will bear a legend substantially in the form set forth below and containing
such other information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the
shares of Pentegra Common Stock to be delivered to Dentist pursuant to this
Agreement have not been and will not be registered under the Securities Act
of 1933, and may not be resold without compliance with the Securities Act of
1933, as amended or an exemption thereunder. The Pentegra Common Stock to be
acquired by Dentist pursuant to this Agreement is being acquired solely for
its own account, for investment purposes only and with no present intention
of distributing, selling or otherwise disposing of it in connection with a
distribution. Dentist covenants, warrants and represents that none of the
shares of Pentegra Common Stock issued to it will be offered, sold, assigned,
pledged, hypothecated, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the Securities Act, as
amended, and the rules and regulations of the Securities Exchange Commission
and applicable state securities laws and regulations. All certificates
evidencing shares of Pentegra Common Stock shall bear the following legend in
addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock
shall bear any legend required by the securities or blue sky laws of any
state where Dentist resides.
<PAGE>
12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic
risk of an investment in Pentegra Common Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and has
such knowledge and experience in financial and business matters that they are
capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect its own interests in connection with
the acquisition of the Pentegra Common Stock. Dentist and its
representatives have had an adequate opportunity to ask questions and receive
answers from the officers of Pentegra concerning any and all matters relating
to the background and experience of the officers and directors of Pentegra,
the plans for the operations of the business of Pentegra, and any plans for
additional acquisitions and the like. Dentist and its representatives have
asked any and all questions in the nature described in the preceding sentence
and all questions have been answered to their satisfaction. Dentist is an
"accredited investors" as defined in Regulation D of the Securities Act of
1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes
and acknowledges that it had in the past, currently has, and in the future
may possibly have, access to certain confidential information of Pentegra
that is valuable, special and unique assets of Pentegra's businesses.
Dentist agrees that it will not disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or
reason whatsoever, unless (i) such information becomes available to or known
by the public generally through no fault of Dentist, (ii) disclosure is
required by law or the order of any governmental authority under color of
law, provided, that prior to disclosing any information pursuant to this
clause (ii), Dentist shall, if possible, give prior written notice thereof to
the other parties hereto, and provide such other parties hereto, at their
sole cost and expense, with the opportunity to contest such disclosure, (iii)
Dentist reasonably believes that such disclosure is required in connection
with the defense of a lawsuit against the disclosing party, or (iv) Dentist
is the sole and exclusive owner of such confidential information as a result
of the transactions contemplated hereunder or otherwise. In the event of a
breach or threatened breach by Dentist of the provisions of this SECTION 13,
Pentegra shall be entitled to an injunction restraining Dentist from
disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Pentegra from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. The obligations of the parties under this SECTION 13 shall
survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement, together with the transactions contemplated by the Other
Agreement and the Initial Public Offering, will qualify as an exchange
meeting the requirements of Section 351 of the Code. The tax returns (and
schedules thereto) of Dentist and Pentegra shall be filed in a manner
consistent with such intention and Dentist and Pentegra shall each provide
the other with such tax information, reports, returns or schedules as may be
reasonably required to assist the other in so reporting the transactions
contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
<PAGE>
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Dentist:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.13, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Dentist for services rendered in
connection with negotiating and closing the transactions contemplated by this
Agreement or the documents to be executed in connection herewith, whether or
not such costs or expenses are incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Dentist.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of
<PAGE>
this Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one and the
same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Dentist, be relieved from its obligations
to Dentist under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Dentist, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes (other than sales and use taxes) levied upon
the Assets for the calendar year in which the Closing occurs. Such taxes
shall be estimated, apportioned and pro-rated among Dentist and Pentegra as
of the Closing Date, and the prorated amount due Pentegra shall be credited
to the cash portion of the Purchase Consideration. Upon payment by Pentegra
of such taxes actually assessed and paid on the Assets, Pentegra shall
calculate the apportionment of such taxes and shall pay Dentist or may demand
from Dentist, and Dentist agrees to pay, the amount necessary to correct the
estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Dentist (hereinafter referred to as a "Party"), whether made before or after
the institution of any legal proceeding, any dispute among the parties
<PAGE>
hereto in any way arising out of, related to, or in connection with this
Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration
in accordance with the terms of this Section (hereinafter the "Arbitration
Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or foreclosing upon any
personal property in which there has been granted a security interest or lien
by a Party in the Documents. In Disputes involving indebtedness or other
monetary obligations, each Party agrees that the other Party may proceed
against all liable persons, jointly and severally against one or more of
them, without impairing rights against other liable persons. Nor shall a
Party be required to join the principal obligor or any other liable persons
(e.g., sureties or guarantors) in any proceeding against a particular person.
A Party may release or settle with one or more liable persons as the Party
deems fit without releasing or impairing rights to proceed against any
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoeniz,
Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term,
<PAGE>
covenant, condition or provision of the Arbitration Program is found to be
unlawful or invalid or unenforceable, such illegality or invalidity or
unenforceable shall not affect the legality, validity or enforceability of
the remaining parts of this Arbitration Program, and all such remaining parts
hereof shall be valid and enforceable and have full force and effect as if
the illegal, invalid or unenforceable part had not been included. Each Party
agrees to keep all Disputes and arbitration proceedings strictly
confidential, except for disclosures of information required in the ordinary
course of business of the Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
--------------------------------------
Its: Senior Vice President
--------------------------------------
/s/ Salvatore J. Guarnieri, D.D.S.
------------------------------------
Salvatore J. Guarnieri, D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 [intentionally omitted]
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
KENT M. HAMILTON, D.D.S., P.C.
AND
KENT M. HAMILTON, D.D.S.
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . 3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . 8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . .10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . .10
<PAGE>
Section 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . .10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . .10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . .10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . .10
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . .11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . .11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . .11
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . .11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . .11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . .11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . .12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . .12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . .12
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . .12
Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . .12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . .13
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . .13
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . .13
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . .13
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . .13
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . .13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . .13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . .13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . .13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . .13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . .13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . .14
Section 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . .14
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . .14
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . .14
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . .14
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . . . . .14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . .15
<PAGE>
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . .16
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . .16
10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS . . . . . . . . . . .17
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . .18
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . .19
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . .19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . .20
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . .21
14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . .21
14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . .21
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . .21
14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . .21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . .22
14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . .22
14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . .22
14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed
as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra"), Kent M. Hamilton, D.D.S., P.C.
("Contributor") and Kent M. Hamilton, D.D.S., shareholders of Contributor
(referred to herein as "Shareholder" or "Shareholders").
WITNESSETH:
WHEREAS, Contributor operates a dental practice ("Business") and Pentegra
is engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra
desires to receive from Contributor, certain assets of Contributor;
WHEREAS, Pentegra or its affiliated designee has entered into or intends to
enter into Agreements and Plans of Reorganization, Asset Contribution Agreements
and other acquisition agreements (collectively, the "Other Agreements") with
such persons or entities or the stockholders of such entities listed on EXHIBIT
A (together with Contributor, the "Target Companies");
WHEREAS, it is intended for Federal income tax purposes that the transfers
contemplated by this Agreement, the Other Agreements and Pentegra's initial
public offering ("Initial Public Offering") of shares of its common stock, par
value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange
within the meaning of Section 351 of the Internal Revenue Code of 1986, as
amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock
is consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions
contained herein, on the Closing Date, Contributor shall convey, transfer,
deliver and assign to Pentegra or any affiliate of Pentegra designated by
Pentegra all of Contributor's right, title and interest in and to those certain
assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and
collectively "Assets"), free and clear of all obligations, security interests,
claims, liens and encumbrances, except as specifically assumed, or taken subject
to, by Pentegra pursuant to SECTION 1.3(b) hereof.
<PAGE>
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and contributed hereunder, and Contributor shall retain all of its
right, title and interest in and to, the assets not specifically transferred
hereunder, including without limitation, the assets described on EXHIBIT 1.2
(the "Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Contributor
contained herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Contributor the consideration
specified in ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Contributor listed on EXHIBIT
1.3(b) attached hereto to the extent that such obligations, commitments,
liabilities and indebtedness are current and not otherwise in default. (the
"Assumed Liabilities"). Notwithstanding any contrary provision contained
herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume:
(i) any liability, commitment or obligation or trade payable or indebtedness not
specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on
EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under
such contracts, leases, commitments or obligations which occurred on or before
the Closing Date; (iii) any liability for any employee benefits payable to
employees of Contributor, including, but not limited to, liabilities arising
under any Contributor Plan (as defined in SECTION 2.21 hereof); (iv) any
liability based upon or arising out of a violation of any antitrust or similar
restraint-of-trade laws by any Shareholder or Contributor, including, without
limiting the generality of the foregoing, any such antitrust liability which may
arise in connection with agreements, contracts, commitments or orders for the
sale of goods or provision of services by Contributor reflected on the books of
Contributor at or prior to the Closing Date; (v) any liability based upon or
arising out of any tortious or wrongful actions of Contributor, any licensed
professional employee or independent contractor of Contributor or any
Shareholder, (vi) any liability for the payment of any taxes of Contributor or
any Shareholder, including without limitation, sales, use and other transfer
taxes and income taxes arising from or by reason of the transactions
contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust
or mortgages on real property; nor (viii) any liability incurred or to be
incurred pursuant to any malpractice or other suits or actions pending against
Contributor or any Shareholder.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement,
Contributor and Shareholders shall execute and deliver all such deeds, bills of
sale, assignments and assurances and take and do all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under the Assets in Pentegra or otherwise
to carry out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS.
Contributor and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Contributor is a professional
corporation or association, as applicable, duly organized, validly existing and
in good standing under the laws of the State of Texas. Contributor has all
necessary corporate powers to own all of its assets and to carry on its business
as such business is now being conducted. Contributor does not own stock in or
control, directly or indirectly,
<PAGE>
any other corporation, association or business organization, nor is
Contributor a party to any joint venture or partnership. The Shareholders are
the sole shareholders of Contributor and own all outstanding shares of
capital stock free of all security interests, claims, encumbrances and liens
in the amounts set forth on EXHIBIT 2.1. Each share of Contributor's common
stock has been legally and validly issued and fully paid and nonassessable.
No shares of capital stock of Contributor are owned by Contributor in
treasury. There are no outstanding (a) bonds, debentures, notes or other
obligations the holders of which have the right to vote with the stockholders
of Contributor on any matter, (b) securities of Contributor convertible into
equity interests in Contributor, or (c) commitments, options, rights or
warrants to issue any such equity interests in Contributor, to issue
securities of Contributor convertible into such equity interests, or to
redeem any securities of Contributor. No shares of capital stock of
Contributor have been issued or disposed of in violation of the preemptive
rights, rights of first refusal or similar rights of any of Contributor's
stockholders. Contributor is not required to qualify to do business as a
foreign corporation in any other state or jurisdiction by reason of its
business, properties or activities in or relating to such other state or
jurisdiction. Contributor does not have any assets, employees or offices in
any state other than the state set forth in the first sentence of this
SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the corporate
power to execute, deliver and perform this Agreement and all agreements and
other documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all action required by
law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to
authorize the execution, delivery and performance of this Agreement and such
related documents. Each Shareholder has the legal capacity to enter into and
perform this Agreement and the other agreements to be executed and delivered in
connection herewith. Contributor has obtained the approval of its stockholders
necessary to the consummation of the transactions contemplated herein. This
Agreement and all agreements and documents executed and delivered in connection
herewith have been, or will be as of the Closing Date, duly executed and
delivered by Contributor and Shareholders, as appropriate, and constitute or
will constitute the legal, valid and binding obligations of Contributor and
Shareholders, enforceable against Contributor and Shareholders in accordance
with their respective terms, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies. The execution and delivery of this
Agreement, and the agreements executed and delivered pursuant to this Agreement
or to be executed and delivered on the Closing Date, do not, and, subject to the
receipt of consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, violate any provision of the Articles or
Certificate of Incorporation or Bylaws of Contributor or any provisions of, or
result in the acceleration of, any obligation under any mortgage, lien, lease,
agreement, rent, instrument, order, arbitration award, judgment or decree to
which Contributor or any Shareholder is a party or by which Contributor or any
Shareholder is bound, or violate any material restrictions of any kind to which
Contributor is subject, or result in any lien or encumbrance on any of
Contributor's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets, or
waivers thereof, have been duly obtained and are in full force and effect and
are described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Contributor and Shareholders, threatened, which may result in the
revocation, cancellation or suspension, or any adverse modification, of any such
licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Contributor or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been
<PAGE>
declared or paid by Contributor on any of its capital stock since the Balance
Sheet Date. No repurchase of any of Contributor's capital stock has been
approved, effected or is pending, or is contemplated by Contributor.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Contributor and all
amendments thereto have been delivered to Pentegra. The minute books of
Contributor contain accurate minutes of all meetings of and consents to actions
taken without meetings of the Board of Directors and stockholders of Contributor
since its formation. The books of account of Contributor have been kept
accurately in the ordinary course of business and the revenues, expenses, assets
and liabilities of Contributor have been properly recorded in such books.
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore
furnished Pentegra with copies of its unaudited balance sheet and related
unaudited statements of income, retained earnings and cash flows for its prior
two full fiscal years, as well as copies of its unaudited balance sheet as of
December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the
latest date thereof shall be referred to as the "Balance Sheet Date") and any
related unaudited statements of income, retained earnings, schedule of accounts
receivable, accounts payable and accrued liabilities, and cash flows for the
twelve months then ended (collectively, with the related notes thereto, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and results of operations of Contributor as of the dates and for the
periods indicated and reflect all fixed and contingent liabilities of
Contributor.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Contributor or any Shareholder leases, as lessor or lessee,
real or personal property used in operating the Business, related to the Assets
or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable
in accordance with their respective terms, and there is not under any such lease
any existing default by Contributor, as lessor or lessee, or any condition or
event of which any Shareholder or Contributor has knowledge which with notice or
lapse of time, or both, would constitute a default, in respect of which
Contributor or Shareholders have not taken adequate steps to cure such default
or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Contributor and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good, valid
and marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all encumbrances
set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to the Closing Date and evidence of
such releases of liens and claims shall be provided to Pentegra on the Closing
Date and the Assets shall not be used to satisfy such liens, claims or
encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned or
used by Contributor, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Contributor has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT
2.12 is a listing of all names of all predecessor companies of Contributor,
including the names of any entities from whom Contributor previously acquired
significant assets. Except for off-the-shelf software licenses and except as
set forth on EXHIBIT 2.12, Contributor is not a licensee in respect of any
patents, trademarks, service marks, trade names, copyrights or
<PAGE>
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Contributor
in connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Contributor has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on
EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this
Agreement of: (a) the name of each director and officer of Contributor and the
offices held by each, (b) the most recent payroll report of Contributor, showing
all current employees of Contributor and their current levels of compensation,
(c) promised increases in compensation of employees of Contributor that have not
yet been effected, (d) oral or written employment agreements, consulting
agreements or independent contractor agreements (and all amendments thereto) to
which Contributor is a party, copies of which have been delivered to Pentegra,
and (e) all employee manuals, materials, policies, procedures and work-related
rules, copies of which have been delivered to Pentegra. Contributor is in
compliance with all applicable laws, rules, regulations and ordinances
respecting employment and employment practices. Contributor has not engaged in
any unfair labor practice. There are no unfair labor practices charges or
complaints pending or threatened against Contributor, and Contributor has never
been a party to any agreement with any union, labor organization or collective
bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Contributor nor the
Business nor any of the Assets is subject to any pending, nor does Contributor
or any Shareholder have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Contributor, any Shareholder, the Business, the Assets or the
transactions contemplated by this Agreement, and, to the knowledge of
Contributor and Shareholders, no basis for any such action exists, nor is there
any legal impediment of which Contributor or any Shareholder has knowledge to
the continued operation of its business or the use of the Assets in the ordinary
course, subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts, obligations
and commitments of Contributor ("Contracts"), entered into in connection with
and related to the Assets or the Business, all of which are listed or
incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13
(in the case of employment agreements) and EXHIBIT 2.15 (in the case of
Contracts other than leases) attached hereto. Except as otherwise indicated on
such Exhibits, all of such Contracts are valid, binding and enforceable in
accordance with their terms and are in full force and effect, and no defenses,
offsets or counterclaims have been asserted or may be made by any party thereto.
Except as indicated on such Exhibits, there is not under any such Contract any
existing default by Contributor or any Shareholder, or any condition or event of
which Contributor or any Shareholder has knowledge which with notice or lapse of
time, or both, would constitute a default. Contributor and Shareholders have
no knowledge of any default by any other party to such Contracts. Contributor
and Shareholders have not received notice of the intention of any party to any
Contract to cancel or terminate any Contract and have no reason to believe that
any amendment or change to any Contract is contemplated by any party thereto.
Other than those contracts, obligations and commitments listed on EXHIBIT 2.8,
EXHIBIT 2.13 and EXHIBIT 2.15, Contributor are not a party to any material
written or oral agreement contract, lease or arrangement, including without
limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
<PAGE>
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product or
service;
(h) Loan agreement or other contract for money borrowed or lent or to
be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of the
Contributor or Shareholders, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Contributor on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16,
Contributor has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) or entered into any contract, lease, license or
commitment, except in connection with the performance of this Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued, contingent
or otherwise) other than (i) liabilities shown or reflected on the Balance
Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary
course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(d) Made any payments to or loaned any money to any person or entity
other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have been
required due to income or operations of Contributor since the Balance Sheet
Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
<PAGE>
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants or
agents, or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of any officer, employee, consultant or agent;
(j) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties, assets
or business or the Business or the Assets, or experienced any other material
adverse change in its financial condition, assets, prospects, liabilities or
business;
(n) Declared or paid a distribution, payment or dividend of any kind
on the capital stock of Contributor;
(o) Repurchased, approved any repurchase or agreed to repurchase any
of Contributor's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Contributor has filed all tax returns (including tax
reports and other statements) required to have been filed by it, and has paid
all taxes (including any interest, penalty or additions thereto) required to
have been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Contributor has not received any notice that any tax deficiency or
delinquency has been or may be asserted against Contributor. There are no
audits relating to taxes of Contributor pending or in process or, to the
knowledge of Contributor, threatened. Contributor is not currently the
beneficiary of any waiver of any statute of limitations in respect of taxes nor
of any extension of time within which to file any tax return or to pay any tax
assessment or deficiency. There are no liens or encumbrances relating to taxes
on or threatened against any of the assets of Contributor. Contributor has
withheld and paid all taxes required by law to have been withheld and paid by
it. Neither Contributor nor any predecessor of Contributor is or has been a
party to any tax allocation or sharing agreement or a member of an affiliated
group of corporations filing a consolidated Federal income tax return.
Contributor has delivered to Pentegra correct and complete copies of
Contributor's three most recently filed annual state, local and Federal income
tax returns, together with all examination reports and statements of
deficiencies assessed against or agreed to by Contributor during the three
calendar year period preceding the date of this Agreement. Contributor has
neither made any payments, is obligated to make any payments, or is a party to
any agreement that under any circumstance could obligate it to make any payments
that will not be deductible under Code section 280G.
(b) Contributor does not intend to dispose of any of the shares of
Pentegra Common Stock to be received hereunder and is not a party to any plan,
arrangement or agreement for the disposition of such shares.
<PAGE>
Contributor and Shareholders have no knowledge, after due inquiry, of any
such intent, plan, arrangement or agreement by any Shareholder. Nothing
contained herein shall prohibit Contributor from selling such shares of
Pentegra Common Stock after the designated holding period and in accordance
with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated by
this Agreement which may be now or hereafter asserted against Pentegra,
Contributor or Contributor's shareholders resulting from any action taken by
Contributor or any Shareholder or their respective agents or employees, or any
of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against
on the Balance Sheet, Contributor did not have, as of the Balance Sheet Date,
and has not incurred since that date and will not have incurred as of the
Closing Date, any liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, other than
those incurred in the ordinary course of business or as set forth on EXHIBIT
2.16. Contributor and Shareholders do not know, or have reasonable grounds to
know, of any basis for the assertion against Contributor or any Shareholder as
of the Balance Sheet Date, of any claim or liability of any nature in any amount
not fully reflected or reserved against on the Balance Sheet, or of any claim or
liability of any nature arising since that date other than those incurred in the
ordinary course of business or contemplated by this Agreement. All indebtedness
of Contributor (including without limitation, indebtedness for borrowed money,
guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached
hereto.
2.20 INSURANCE POLICIES. Contributor, each Shareholder and each licensed
professional of Contributor carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the industry.
Valid and enforceable policies in such amounts are outstanding and duly in force
and will remain duly in force through the Closing Date. All such policies are
described in EXHIBIT 2.20 attached hereto and true and correct copies have been
delivered to Pentegra. Neither Shareholders nor Contributor have not received
notice or other communication from the issuer of any such insurance policy
cancelling or amending such policy or threatening to do so. Neither
Contributor, nor any Shareholder nor any licensed professional employee of
Contributor has any outstanding claims, settlements or premiums owed against any
insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached
hereto, Contributor has neither established, nor maintains, nor is obligated to
make contributions to or under or otherwise participate in, (a) any bonus or
other type of compensation or employment plan, program, agreement, policy,
commitment, contract or arrangement (whether or not set forth in a written
document); (b) any pension, profit-sharing, retirement or other plan, program or
arrangement; or (c) any other employee benefit plan, fund or program, including,
but not limited to, those described in SECTION 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). All such plans listed on
EXHIBIT 2.20 (individually "Contributor Plan," and collectively "Contributor
Plans") have been operated and administered in all material respects in
accordance with all applicable laws, rules and regulations, including without
limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of
the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended,
the Age Discrimination in Employment Act of 1967, as amended, and the related
rules and regulations adopted by those Federal agencies responsible for the
administration of such laws. No act or failure to act by Contributor has
resulted in a "prohibited transaction" (as defined in ERISA) with respect to the
Contributor Plans. No "reportable event" (as defined in ERISA) has occurred
with respect to any of the Contributor Plans. Contributor has not previously
made, is not currently making, and is not obligated in any way to make, any
contributions to any multiemployer plan within the meaning of the Multi-Employer
Pension Plan Amendments Act of 1980. With respect to each Contributor Plan,
either (i) the value of plan assets (including commitments under insurance
contracts) is at least equal to the value of plan liabilities or (ii) the value
of plan liabilities in excess of plan assets is disclosed on the Balance Sheet,
all as of the Closing Date.
<PAGE>
2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any charter
or other corporate restriction or any judgment, order, writ, injunction, decree,
rule or regulation that materially and adversely affects the condition
(financial or otherwise), operations, assets, liabilities, business or prospects
of Contributor, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Shareholders and
Contributor's licensed professional employees, and the conduct of the Business
and use of the Assets, have complied with all applicable laws, rules,
regulations and licensing requirements, including, without limitation, the
Federal Environmental Protection Act, the Occupational Safety and Health Act,
the Americans with Disabilities Act and any environmental laws and medical waste
laws, and there exist no violations by Contributor, any Shareholder or any
licensed professional employee of Contributor of any Federal, state or local law
or regulation. Contributor and Shareholders have not received any notice of a
violation of any Federal, state and local laws, regulations and ordinances
relating to the operations of the Business and Assets and no notice of any
pending inspection or violation of any such law, regulation or ordinance has
been received by Contributor.
2.24 THIRD PARTY PAYORS. Contributor, Shareholders and each licensed
professional employee or independent contractor of Contributor has timely
filed all claims or other reports required to be filed with respect to the
purchase of services by third-party payors, and all such claims or reports
are complete and accurate, and has no liability to any payor with respect
thereto. There are no pending appeals, overpayment determinations,
adjustments, challenges, audit, litigation or notices of intent to open
Medicare or Medicaid claim determinations or other reports required to be
filed by Contributor, any Shareholder and each licensed professional employee
of Contributor. Neither Contributor, nor any Shareholder, nor any licensed
professional employee of Contributor has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Contributor, Shareholders and Contributor's licensed professional employees
has not (a) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made
any false statement or representation of a material fact for use in
determining rights to any benefit or payment; (c) failed to disclose
knowledge of the occurrence of any event affecting the initial or continued
right to any benefit or payment on its own behalf or on behalf of another,
with the intent to fraudulently secure such benefit or payment; and (d)
violated any applicable state anti-remuneration or self-referral statutes,
rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Contributor or Shareholders in this Agreement, and no Exhibit or certificate
issued or executed by, or information furnished by, officers or directors of
Contributor or any Shareholder and furnished or to be furnished to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Contributor has with any bank or other
financial institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Contributor, or their respective spouses,
children or affiliates, owns directly or indirectly, on an individual or joint
basis, any interest in, has a compensation or other financial arrangement with,
or serves as an officer or director of, any customer or supplier or competitor
of Contributor or any organization that has
<PAGE>
a material contract or arrangement with Contributor.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of
the names and addresses of each payor of Contributor's services which accounted
for more than 10% of revenues of Contributor in the preceding fiscal year.
Contributor has good relations with all such payors and other material payors of
Contributor and none of such payors has notified Contributor that it intends to
discontinue its relationship with Contributor or to deny any claims submitted to
such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Contributor and Shareholders as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions required
by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize
the execution, delivery and performance of this Agreement and such related
documents. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing Date,
duly executed and delivered by Pentegra and constitute or will constitute the
legal, valid and binding obligations of Pentegra, enforceable against Pentegra
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and delivery
of this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and, the
consummation of the actions contemplated hereby will not, violate any provision
of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or decree
to which Pentegra is a party or by which Pentegra is bound, or violate any
material restrictions of any kind to which Pentegra is subject, or result in any
lien or encumbrance on any of Pentegra's assets. Other than as have been
obtained or as would not have a material adverse effect, there are no consents
of any person or entity required for the transaction contemplated hereby on
behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Pentegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would not
have a material adverse effect, there are no proceedings pending or, to the
knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses or
permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any pending,
nor does Pentegra have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Pentegra, its business, assets or the transactions contemplated by
this Agreement, and, to the knowledge of Pentegra, no basis for any such action
exists, nor is there any legal impediment of which Pentegra has knowledge to the
continued operation of its business or the use of its Assets in the ordinary
course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports and
other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to
<PAGE>
have been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra
in this Agreement, and no Exhibit or certificate issued by officers or directors
of Pentegra and furnished or to be furnished to Contributor or any Shareholder
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
SECTION 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS.
Contributor and Shareholders, jointly and severally, agree that between the
date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Shareholders
shall use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Contributor
and Shareholders agree to complete the Exhibits hereto to be provided by them in
form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Contributor and Shareholders shall operate the
Business and use the Assets in the ordinary course. Contributor and
Shareholders shall not enter into any lease, contract, indebtedness, commitment,
purchase or sale or acquire or dispose of any capital asset relating to the
Business or the Assets except in the ordinary course of business. Contributor
and Shareholders shall use their best efforts to preserve the Business and
Assets intact and shall not take any action that would have an adverse effect on
the Business or Assets. Contributor and Shareholders shall use their best
efforts to preserve intact the relationships with payors, customers, suppliers,
patients and others having significant business relations with Contributor.
Contributor and Shareholders shall collect its receivables and pay its trade
payables in the ordinary course of business. Contributor and Shareholders shall
not introduce any new method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Contributor and Shareholders shall permit Pentegra
and its authorized representatives access to, and make available for inspection,
all of the assets and business of Contributor, the Business and the Assets,
including employees, customers and suppliers and permit Pentegra and its
authorized representatives to inspect and make copies of all documents, records
and information with respect to the business or assets of Contributor, the
Business or the Assets as Pentegra or its representatives may request.
Contributor and Shareholders shall promptly notify Pentegra in writing of (a)
any notice or communication relating to a default or event that, with notice or
lapse of time or both, could become a default, under any
<PAGE>
contract, commitment or obligation to which Contributor is a party or
relating to the Business or the Assets, and (b) any adverse change in
Contributor's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor and
Shareholders shall use their best efforts to secure all necessary approvals and
consents of third parties to the consummation of the transactions contemplated
hereby, including consents described on EXHIBIT 2.4. Contributor and
Shareholders shall use their best efforts to obtain all licenses, permits,
approvals or other authorizations required under any law, rule, regulation, or
otherwise to provide the services of Contributor contemplated by the Service
Agreement and to conduct the intended business of Contributor and operate the
Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of Closing or the termination of this Agreement in accordance with the
provisions hereof, Contributor and Shareholders shall not, and shall use its
best efforts to cause Contributor's employees, agents and representatives not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer, including without limitation,
any proposal or offer to any Shareholder, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of Contributor or
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to such proposal
or offer, and Contributor and Shareholders will immediately cease any such
activities, discussions or negotiations heretofore conducted with respect to any
of the foregoing. Contributor and Shareholders shall immediately notify
Pentegra if any such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby covenants
and agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Contributor or any entity might have any liability whatsoever
arising from any insurance, pension plan, employment tax or similar liability
of Contributor to any employee or other person or entity (including, without
limitation, any Contributor Plan and any liability under employment contracts
with Contributor) allocable to services performed prior to the Closing Date.
Contributor and Shareholders acknowledge that the purpose and intent of this
covenant is to assure that Pentegra shall have no unfunded liability whatsoever
at any time after the Closing Date with respect to any of Contributor's
employees or similar persons or entities, including, without limitation, any
Contributor Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of any Shareholder (other than in the ordinary course of business) or other
employee or an independent contractor of Contributor, adopt, amend or terminate
any compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect upon Contributor, its business, assets or
prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Contributor, nor will any repurchase of
any of Contributor's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Shareholders
shall use their best efforts to take, or cause to be taken, all actions
necessary to effect the acquisition contemplated hereby under applicable law.
<PAGE>
4.10 ACCOUNTING AND TAX MATTERS. Contributor and Shareholders will not
change in any material respect the tax or financial accounting methods or
practices followed by Contributor (including any material change in any
assumption underlying, or any method of calculating, any bad debt,
contingency or other reserve), except as may be required by law or generally
accepted accounting principles. Contributor and Shareholders will duly,
accurately and timely (without regard to any extensions of time) file all
returns, information statements and other documents relating to taxes of
Contributor required to be filed by it, and pay all taxes required to be paid
by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Contributor hereby waive any compliance with the applicable state Bulk
Transfers Act, if any. Contributor and Shareholders covenant and agree that
all of the creditors with respect to the Business and the Assets will be paid
in full by Contributor prior to the Closing Date, except to extent that any
liability to such creditors is assumed by Pentegra pursuant to this
Agreement. If required by Pentegra, Contributor and Shareholders shall
furnish Pentegra with proof of payment of all creditors with respect to the
Business and the Assets. Notwithstanding the foregoing, Contributor and
Shareholders may dispute the validity or amount of any such creditor's claim
without being deemed to be in violation of this SECTION 4.11, provided that
such dispute is in good faith and does not unreasonably delay the resolution
of the claim and provided, further that Contributor and Shareholders agree to
indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Contributor leases any of its premises from any
Shareholder or other affiliate of Contributor or any shareholder of
Contributor, Pentegra shall have entered into a building lease (the "Building
Lease") with the owner of such premises on terms and conditions satisfactory
to Pentegra, the terms and conditions of which shall include, without
limitation, (i) a five year initial term plus three five-year renewal
options, (ii) a lease rate equal to the fair market value lease rate, as
agreed to by Pentegra, and (iii) such other provisions to be acceptable to
Pentegra.
4.13 HIRING OF EMPLOYEES. Contributor and Shareholders shall cooperate
with all requests made by Pentegra for the purpose of allowing Pentegra to
hire those non-dental employees of Contributor designated by Pentegra, such
employment to be effective as of the Closing Date. Notwithstanding the
above, Contributor and Shareholders shall remain liable under any Contributor
Plans for any claims incurred by any employees or their spouses or
dependents, and for all compensation, bonuses, benefits and other such items
and other liabilities related to Contributor's employees incurred by
Contributor prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges that
all employees of Contributor hired by Pentegra pursuant to SECTION 4.13
above, shall be treated as "leased employees" (as defined in Code Section
414(n)) of Contributor and shall be treated as Clinic employees for purposes
of eligibility and participation in Contributor Plans.
4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates to
be named as an additional insured on its liability insurance programs,
effective as of the Closing Date.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts
<PAGE>
to secure all necessary approvals and consents of third parties to the
consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS.
Pentegra, Shareholders and Contributor agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Contributor and Shareholders
shall cooperate to promptly prepare and file with the Securities Exchange
Commission ("SEC") the Registration Statement on Form S-1 (or other
appropriate Form) to be filed by Pentegra in connection with its Initial
Public Offering (including the prospectus constituting a part thereof, the
"Registration Statement"). Pentegra shall obtain all necessary state
securities laws or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement and the Contributor and
Shareholders shall furnish all information concerning Contributor and
Shareholders as may be reasonable requested in connection with any such
action.
Contributor and Shareholder represent and warrant that none of the
information or documents supplied or to be supplied by it specifically for
inclusion in the Registration Statement, by exhibit or otherwise, will, at
the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act of 1933, 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, in
light of the circumstances under which they were made, not misleading.
Contributor and Shareholders shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.
Contributor and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by
Pentegra in connection with the preparation of the Registration Statement and
each amendment or supplement thereto, or any other statement, filing, notice
or application made by or on behalf of each such party or any of its
subsidiaries to any governmental entity in connection with the transactions
contemplated by the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Contributor and Shareholders contained herein shall have been true and
correct in all respects when initially made and shall be true and correct in
all respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Contributor and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Contributor and Shareholders
prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Contributor shall have occurred since the
<PAGE>
Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Contributor, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and Pentegra
shall have executed and delivered a Service Agreement (the "Service
Agreement"), in substantially the form attached hereto as EXHIBIT 7.7,
pursuant to which Pentegra will provide management services to the
Contributor. Each Shareholder shall have executed and delivered a Guaranty
Agreement in substantially the form attached as EXHIBIT 4.10 of the Service
Agreement pursuant to which Shareholder shall, among other things, guaranty
the obligations of Contributor under the Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated, and
caused each shareholder of Contributor that has an existing employment
agreement with Contributor to have terminated his or her employment agreement
with Contributor and shall have executed an employment agreement ("Employment
Agreement") with Contributor in form and substance attached hereto as EXHIBIT
7.8 and otherwise satisfactory to Contributor and Pentegra.
7.9 CONSENTS AND APPROVALS. Contributor and Shareholders shall have
obtained all necessary government and other third-party approvals and
consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables
or payables between Contributor and its shareholders or affiliates and
Contributor shall not have any liabilities, including indebtedness,
guaranties and capital leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Contributor and Shareholders shall have named Pentegra
as an additional insured on their liability insurance program in accordance
with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Contributor since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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 on or before December 31, 1997. At or prior to the date that the
Registration Statement is declared effective by the SEC, Pentegra shall have
received all state securities and "Blue Sky" permits necessary to consummate
the transactions contemplated hereby. The Pentegra Common Stock shall have
been approved for listing on Nasdaq or other exchange selected by Pentegra,
subject only to official notification of issuance.
SECTION 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Contributor and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
<PAGE>
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pentegra contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Contributor shall have received all documents,
duly executed in form satisfactory to Contributor and its counsel, referred
to in SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. Within five business
days after requested by Pentegra, Contributor and Shareholders shall deliver
to Pentegra the following, all of which shall be in a form satisfactory to
counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel
for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or
letter agreement in form and substance mutually acceptable to the parties
hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of
Contributor authorizing the execution, delivery and performance of this
Agreement, the Service Agreement, the Employment Agreements and all related
documents and agreements each certified by the Secretary as being true and
correct copies of the original thereof;
(d) a bill of sale conveying the Assets to Pentegra;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(f) certificates of the Shareholders and a duly authorized officer of
Contributor dated as of the
<PAGE>
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Contributor and Shareholder contained herein; (ii) as to the
performance of and compliance by Contributor and Shareholder with all
covenants contained herein; and (iii) certifying that all conditions
precedent of Contributor and Shareholders to the Closing have been satisfied;
(g) a certificate of the Secretary of Contributor certifying as to
the incumbency of the directors and officers of Contributor and as to the
signatures of such directors and officers who have executed documents
delivered at the Closing on behalf of Contributor;
(h) a certificate, dated within 30 days of the Closing Date, of
the Secretary of the State of incorporation of Contributor and any state of
required foreign qualification of Contributor establishing that Contributor
is in existence and is in good standing to transact business in its state of
incorporation;
(i) an opinion of counsel to Contributor and Shareholder opining
as to the execution and delivery of this Agreement and the other documents
and agreements to be executed pursuant hereto, the good standing and
authority of Contributor, the enforceability of this Agreement and the other
agreements and documents to be executed in connection herewith, and other
matters reasonably requested by Pentegra;
(j) non-foreign affidavits executed by Contributor;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Contributor, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested
by Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Contributor and Shareholder, the following, all of which
shall be in a form satisfactory to counsel to Contributor and Shareholders
and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in
escrow pending Closing, pursuant to an escrow agreement or letter agreement
in form and substance mutually acceptable to the parties hereto:
(a) the Acquisition Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of
Pentegra (or a committee thereof) authorizing the execution, delivery and
performance of this Agreement and all related documents and agreements each
certified by the Secretary as being true and correct copies of the original
thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
<PAGE>
(f) a certificate of the Secretary of Pentegra certifying as to
the incumbency of the directors and officers of Pentegra and as to the
signatures of such directors and officers who have executed documents
delivered at the Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Contributor;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Contributor;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested
by Contributor to carry out and effect the purpose and intent of this
Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit attached hereto, any agreement executed pursuant hereto, and
any certificate executed and delivered by any party pursuant to the terms of
this Agreement, shall constitute representations and warranties of
Contributor and Shareholders, jointly and severally, or of Pentegra, as the
case may be. All such representations and warranties, and all
representations and warranties expressly labeled as such in this Agreement
shall survive the date of this Agreement and the Closing Date for a period of
five (5) years following the Closing Date, except that (i) the
representations and warranties with respect to environmental and medical
waste laws and health care laws and matters shall survive for a period of
fifteen (15) years and tax representations shall survive until one year after
the expiration of the applicable statute of limitations. Each party covenants
with the other parties not to make any claim with respect to such
representations and warranties, against any party after the date on which
such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof,
unless such party has timely given the notice required in SECTION 10.2, 10.3
or 10.4 hereof, as the case may be. Each party hereby releases, acquits and
discharges the other party from any and all claims and demands, actions and
causes of action, damages, costs, expenses and rights of setoff with respect
to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable,
are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS
SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"),
SHALL INDEMNIFY AND HOLD CONTRIBUTOR AND ITS SHAREHOLDERS, AGENTS AND
EMPLOYEES (EACH OF THE FOREGOING, INCLUDING CONTRIBUTOR AND SHAREHOLDERS, FOR
PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN
"INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES,
LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING,
BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH
APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO
<PAGE>
BE FURNISHED BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE
BUSINESS, OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. CONTRIBUTOR AND
SHAREHOLDERS (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT
APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL
INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS,
SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND
EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR
WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY,
AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO
BE FURNISHED BY INDEMNITOR HEREUNDER, AND
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT
AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES,
AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS WHETHER
ON OR AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY CONTRIBUTOR OR ITS SHAREHOLDERS OR THEIR
CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE
OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR
OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE
<PAGE>
CONTRIBUTOR OR SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY
PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF CONTRIBUTOR OR ANY SHAREHOLDER OR ANY OTHER PERSON OR
ENTITY RELATED TO OR AFFILIATED WITH THE CONTRIBUTOR OR SHAREHOLDER ARISING
FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF CONTRIBUTOR OR THE SHAREHOLDERS FOR COSTS AND
EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN
CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN
CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS
SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE CONTRIBUTOR OR
ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS,
THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
CONTRIBUTOR OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO
MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after
Indemnified Person receives written notice of the commencement of any action
or other proceeding in respect of which indemnification or reimbursement may
be sought hereunder, or within such lesser time as may be provided by law for
the defense of such action or proceeding, such Indemnified Person shall
notify Indemnitor thereof. If any such action or other proceeding shall be
brought against any Indemnified Person, Indemnitor shall, upon written notice
given within a reasonable time following receipt by Indemnitor of such notice
from Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor
<PAGE>
be required to pay fees and expenses hereunder for more than one firm of
attorneys of Indemnified Person in any jurisdiction in any one action or
proceeding or group of related actions or proceedings. Indemnitor shall not,
without the prior written consent of any Indemnified Person, settle or
compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding to which such Indemnified Person is a
party unless such settlement, compromise or consent includes an unconditional
release of such Indemnified Person from all liability arising or potentially
arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Contributor or any Shareholder
giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof,
Pentegra shall be entitled to offset the amount of damages incurred by it as
a result of such breach of warranty, representation, covenant or agreement
against any amounts payable by Pentegra, including the amounts payable under
the Service Agreement. In the event of any breach of warranty,
representation, covenant or agreement by Pentegra giving rise to
indemnification under SECTION 10.2 or SECTION 10.4 hereof, Dentist shall be
entitled to offset the amount of damages incurred by it as a result of such
breach of warranty, representation, covenant or agreement against any amounts
payable by Dentist, including amounts payable under the Service Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of
Contributor or Shareholder contained in this Agreement or in any certificate
or other document executed and delivered by Contributor or any Shareholder
pursuant to this Agreement is or becomes untrue or breached in any material
respect or if Contributor or any Shareholder fails to comply in any material
respect with any covenant or agreement contained herein, and any such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;
(c) at any time by Contributor or any Shareholder if any representation
or warranty of Pentegra contained in this Agreement or in any certificate or
other document executed and delivered by Pentegra pursuant to this Agreement
is or becomes untrue or breached in any material respect or if Pentegra fails
to comply in any material respect with any covenant or agreement contained
herein and such misrepresentation, noncompliance or breach is not cured,
waived or eliminated within twenty (20) days after receipt of written notice
thereof;
(d) by Pentegra, Shareholders or Contributor if the transaction
contemplated (including the Initial Public Offering) hereby shall not have
been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Contributor, that such termination
is desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Contributor shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares
of Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer
shall be treated as effective for any purpose or (b) engage in any
transaction, whether or not with respect to any shares of Pentegra Common
Stock or any interest therein, the intent or effect of which is to reduce the
risk of owning shares of Pentegra Common Stock. The certificates evidencing
<PAGE>
the Pentegra Common Stock delivered to Contributor pursuant to the terms
hereof will bear a legend substantially in the form set forth below and
containing such other information as Pentegra may deem necessary or
appropriate:
The shares represented by this certificate may not be voluntarily
sold, assigned, exchanged, transferred, encumbered, pledged,
distributed, appointed or otherwise disposed of, and the issuer
shall not be required to give effect to any attempted voluntary sale,
assignment, exchange, transfer, encumbrance, pledge, distribution,
appointment or other disposition prior to _________ [date that is one
year from the Closing Date]. Upon the written request of the holder
of this certificate, the issuer agrees to remove this restrictive
legend (and any stop order placed with the transfer agent) after the
date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Shareholders
acknowledge that the shares of Pentegra Common Stock to be delivered to
Contributor pursuant to this Agreement have not been and will not be
registered under the Securities Act of 1933 and may not be resold without
compliance with the Securities Act of 1933. The Pentegra Common Stock to be
acquired by Contributor pursuant to this Agreement is being acquired solely
for its own account, for investment purposes only and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution. Contributor covenants, warrants and represents that
none of the shares of Pentegra Common Stock issued to it will be offered,
sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
except after full compliance with all of the applicable provisions of the
Securities Act, as amended, and the rules and regulations of the Securities
Exchange Commission and applicable state securities laws and regulations.
All certificates evidencing shares of Pentegra Common Stock shall bear the
following legend in addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the
Securities Act of 1933 (the "Act") and may only be sold or otherwise
transferred if the holder hereof complies with the Act and applicable
securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Contributor resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Shareholders are
able to bear the economic risk of an investment in Pentegra Common Stock
acquired pursuant to this Agreement and can afford to sustain a total loss of
such investment and have such knowledge and experience in financial and
business matters that they are capable of evaluating the merits and risks of
the proposed investment and therefore have the capacity to protect their own
interests in connection with the acquisition of the Pentegra Common Stock.
Contributor, Shareholders and their representatives have had an adequate
opportunity to ask questions and receive answers from the officers of
Pentegra concerning any and all matters relating to the background and
experience of the officers and directors of Pentegra, the plans for the
operations of the business of Pentegra, and any plans for additional
acquisitions and the like. Contributor, Shareholders and their
representatives have asked any and all questions in the nature described in
the preceding sentence and all questions have been answered to their
satisfaction. Contributor and Shareholders are "accredited investors" as
defined in Regulation D of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Contributor and Shareholders agree that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally
through no fault of Contributor or Shareholders, (ii)
<PAGE>
disclosure is required by law or the order of any governmental authority
under color of law, provided, that prior to disclosing any information
pursuant to this clause (ii), Contributor and Shareholders shall, if
possible, give prior written notice thereof to the other parties hereto, and
provide such other parties hereto with the opportunity to contest such
disclosure, (iii) Contributor and Shareholders reasonably believe that such
disclosure is required in connection with the defense of a lawsuit against
the disclosing party, or (iv) Contributor and Shareholders are the sole and
exclusive owner of such confidential information as a result of the
transactions contemplated hereunder or otherwise. In the event of a breach
or threatened breach by Contributor or Shareholders of the provisions of this
SECTION 13, Pentegra shall be entitled to an injunction restraining
Contributor and Shareholders from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
Pentegra from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages. The obligations of the
parties under this SECTION 13 shall survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions
contemplated by this Agreement, together with the transactions contemplated
by the Other Agreement and the Initial Public Offering, will qualify as an
exchange meeting the requirements of Section 351 of the Code. The tax
returns (and schedules thereto) of Shareholders, Contributor and Pentegra
shall be filed in a manner consistent with such intention and Contributor and
Pentegra shall each provide the other with such tax information, reports,
returns or schedules as may be reasonably required to assist the other in so
reporting the transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Contributor or Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
<PAGE>
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any
further acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Contributor or any Shareholder for
services rendered in connection with negotiating and closing the transactions
contemplated by this Agreement or the documents to be executed in connection
herewith, whether or not such costs or expenses are incurred before or after
the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Contributor.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF
CONTRIBUTOR AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS
PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one
<PAGE>
and the same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding
on, and shall inure to the benefit of, the parties hereto, and their
respective successors and assigns, and no other person shall acquire or have
any right under or by virtue of this Agreement. No party may assign any
right or obligation hereunder without the prior written consent of the other
parties; provided, however, that Pentegra may assign its rights and delegate
its obligations hereunder to any entity that is an affiliate of Pentegra.
For purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Contributor, be relieved from its
obligations to Contributor under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Contributor, on the other hand, file suit in any court against any
other party to enforce the terms of this Agreement against the other party or
to obtain performance by it hereunder, the prevailing party will be entitled
to recover all reasonable costs, including reasonable attorneys' fees, from
the other party as part of any judgment in such suit. The term "prevailing
party" shall mean the party in whose favor final judgment after appeal (if
any) is rendered with respect to the claims asserted in the Complaint.
"Reasonable attorneys' fees" are those reasonable attorneys' fees actually
incurred in obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at
Closing a pro rata portion of all taxes levied upon the Assets for the
calendar year in which the Closing occurs. Such taxes shall be estimated,
apportioned and pro-rated among Contributor and Pentegra as of the Closing
Date, and the prorated amount due Pentegra shall be credited to the cash
portion of the Purchase Consideration. Upon payment by Pentegra of such
taxes actually assessed and paid on the Assets, Pentegra shall calculate the
apportionment of such taxes and shall pay Contributor or may demand from
Contributor, and Contributor agrees to pay, the amount necessary to correct
the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified
or supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Contributors or Shareholders (hereinafter referred to as a "Party"), whether
made before or after the institution of any legal proceeding, any dispute
among the parties hereto in any way arising out of, related to, or in
connection with this Agreement (hereinafter a "Dispute"), shall be resolved
by binding arbitration in accordance with the terms of this Section
(hereinafter the "Arbitration Program").
All Disputes between the Parties shall be resolved by binding
arbitration administered by the American Arbitration Association (the "AAA")
in accordance with the terms of this Arbitration Program, the Commercial
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or
<PAGE>
foreclosing upon any personal property in which there has been granted a
security interest or lien by a Party in the Documents. In Disputes involving
indebtedness or other monetary obligations, each Party agrees that the other
Party may proceed against all liable persons, jointly and severally against
one or more of them, without impairing rights against other liable persons.
Nor shall a Party be required to join the principal obligor or any other
liable persons (e.g., sureties or guarantors) in any proceeding against a
particular person. A Party may release or settle with one or more liable
persons as the Party deems fit without releasing or impairing rights to
proceed against any persons not so released. All statutes of limitation that
would otherwise be applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoenix,
Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or by
applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
<PAGE>
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
Kent M. Hamilton, D.D.S., P.C.
By: /s/ Kent M. Hamilton, D.D.S.
--------------------------------------------------
Its: President
-------------------------------------------------
PENTEGRA DENTAL GROUP, INC.
By: /s/ James L. Dunn, Jr.
--------------------------------------------------
Its: Senior Vice President
-------------------------------------------------
/s/ Kent M. Hamilton, D.D.S.
-----------------------------------------------------
Kent M. Hamilton, D.D.S.
<PAGE>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment
Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
469
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
and
DAVID R. HENDERSON, D.D.S.
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . 2
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . 3
2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . 3
2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . 3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . 3
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . 3
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . 3
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . 6
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . 6
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . 6
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . 6
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . 7
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . 7
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . 7
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . 7
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . 7
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . 8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . 8
3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . 8
3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . 8
3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . 8
Section 4. COVENANTS OF DENTIST.
4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . 9
<PAGE>
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . 9
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . 9
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . 9
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . 9
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . 10
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . 10
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . 10
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . 10
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . 10
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . 10
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . 10
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . 11
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . 11
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . 11
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . 11
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . 11
Section 6. COVENANTS OF PENTEGRA AND DENTIST
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . 12
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . 12
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . 12
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . 12
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . 12
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . 13
Section 8. DENTIST'S CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . 13
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . 13
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . 13
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . 14
Section 9. CLOSING DELIVERIES
<PAGE>
9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . 15
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . 15
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . 16
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . 17
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . 18
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . 19
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . 19
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . 20
14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . 20
14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . 20
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . 21
14.12 NO RULE OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . 21
14.13 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . 21
14.14 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.15 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . 21
14.16 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . 23
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed
effective August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra") and DAVID R. HENDERSON, D.D.S. ("Dentist").
WITNESSETH:
WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires
to receive from Dentist, certain assets of Dentist;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Dentist, the "Target Companies");
WHEREAS, it is intended for Federal income tax purposes that the
transfers contemplated by this Agreement, the Other Agreements and Pentegra's
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an
exchange within the meaning of Section 351 of the Internal Revenue Code of
1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and
conditions contained herein, on the Closing Date, Dentist shall convey,
transfer, deliver and assign to Pentegra or any affiliate of Pentegra
designated by Pentegra all of Dentist's right, title and interest in and to
those certain assets described on EXHIBIT 1.1 attached hereto (individually,
"Asset", and collectively "Assets"), free and clear of all obligations,
security interests, claims, liens and encumbrances, except as specifically
assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof.
<PAGE>
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and contributed hereunder, and Dentist shall retain all of its
right, title and interest in and to, the assets not specifically transferred
hereunder, including without limitation, the assets described on EXHIBIT 1.2
(the "Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Dentist
contained herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Dentist the consideration specified
in ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b)
attached hereto to the extent that such obligations, commitments, liabilities
and indebtedness are current and not otherwise in default. (the "Assumed
Liabilities"). Notwithstanding any contrary provision contained herein,
Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i)
any liability, commitment or obligation or trade payable or indebtedness not
specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on
EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default
under such contracts, leases, commitments or obligations which occurred on or
before the Closing Date; (iii) any liability for any employee benefits
payable to employees of Dentist, including, but not limited to, liabilities
arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any
liability based upon or arising out of a violation of any antitrust or
similar restraint-of-trade laws by Dentist, including, without limiting the
generality of the foregoing, any such antitrust liability which may arise in
connection with agreements, contracts, commitments or orders for the sale of
goods or provision of services by Dentist reflected on the books of Dentist
at or prior to the Closing Date; (v) any liability based upon or arising out
of any tortious or wrongful actions of Dentist, any licensed professional
employee or independent contractor of Dentist, (vi) any liability for the
payment of any taxes of Dentist, including without limitation, sales, use and
other transfer taxes and income taxes arising from or by reason of the
transactions contemplated by this Agreement; (vii) any indebtedness secured
by deeds of trust or mortgages on real property; nor (viii) any liability
incurred or to be incurred pursuant to any malpractice or other suits or
actions pending against Dentist.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement, the
Dentist shall execute and deliver all such deeds, bills of sale, assignments
and assurances and take and do all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under the Assets in Pentegra or otherwise to carry
out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
Dentist hereby represents and warrants to Pentegra as follows:
2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the
State of Arizona. Dentist does not have any assets, employees or offices in
any state other than the state set forth in the first sentence of this
SECTION 2.1.
2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into
and perform this Agreement and the other agreements to be executed and
delivered in connection herewith. This Agreement
<PAGE>
and all agreements and documents executed and delivered in connection
herewith have been, or will be as of the Closing Date, duly executed and
delivered by Dentist and constitute or will constitute the legal, valid and
binding obligations of Dentist in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of
consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, result in the acceleration of, any obligation
under any mortgage, lien, lease, agreement, rent, instrument, order,
arbitration award, judgment or decree to which Dentist is a party or by which
Dentist is bound, or violate any material restrictions of any kind to which
Dentist is subject, or result in any lien or encumbrance on any of Dentist's
assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Dentist, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Dentist.
2.5 [INTENTIONALLY DELETED].
2.6 [INTENTIONALLY DELETED].
2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any
related unaudited statements of income, retained earnings, schedule of
accounts receivable, accounts payable and accrued liabilities, and cash flows
for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Dentist as of
the dates and for the periods indicated and reflect all fixed and contingent
liabilities of Dentist.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Dentist leases, as lessor or lessee, real or personal
property used in operating the Business, related to the Assets or otherwise.
All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance
with their respective terms, and there is not under any such lease any
existing default by Dentist, as lessor or lessee, or any condition or event
of which Dentist has knowledge which with notice or lapse of time, or both,
would constitute a default, in respect of which Dentist has not taken
adequate steps to cure such default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Dentist has no knowledge of any
latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and
marketable title to all
<PAGE>
of the Assets, free and clear of any liens, claims, charges, exceptions or
encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10
attached hereto. Dentist shall cause all encumbrances set forth on EXHIBIT
2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be
released or terminated prior to the Closing Date and evidence of such
releases of liens and claims shall be provided to Pentegra on the Closing
Date and the Assets shall not be used to satisfy such liens, claims or
encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Dentist, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Dentist has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Dentist, including the names of any entities from whom Dentist previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Dentist in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Dentist has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the most recent payroll report of Dentist, showing
all current employees of Dentist and their current levels of compensation,
(b) promised increases in compensation of employees of Dentist that have not
yet been effected, (c) oral or written employment agreements, consulting
agreements or independent contractor agreements (and all amendments thereto)
to which Dentist is a party, copies of which have been delivered to Pentegra,
and (d) all employee manuals, materials, policies, procedures and
work-related rules, copies of which have been delivered to Pentegra. Dentist
is in compliance with all applicable laws, rules, regulations and ordinances
respecting employment and employment practices. Dentist has not engaged in
any unfair labor practice. There are no unfair labor practices charges or
complaints pending or threatened against Dentist, and Dentist has never been
a party to any agreement with any union, labor organization or collective
bargaining unit.
2.14 LEGAL PROCEEDINGS. Other than as set forth on EXHIBIT 2.14, neither
Dentist nor the Business nor any of the Assets is subject to any pending, nor
does Dentist have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Dentist, the Business, the Assets or the transactions contemplated
by this Agreement, and, to the knowledge of Dentist, no basis for any such
action exists, nor is there any legal impediment of which Dentist has
knowledge to the continued operation of its business or the use of the Assets
in the ordinary course, subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Dentist ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force
<PAGE>
and effect, and no defenses, offsets or counterclaims have been asserted or
may be made by any party thereto. Except as indicated on such Exhibits, there
is not under any such Contract any existing default by Dentist, or any
condition or event of which Dentist has knowledge which with notice or lapse
of time, or both, would constitute a default. Dentist has no knowledge of
any default by any other party to such Contracts. Dentist has not received
notice of the intention of any party to any Contract to cancel or terminate
any Contract and have no reason to believe that any amendment or change to
any Contract is contemplated by any party thereto. Other than those
contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13
and EXHIBIT 2.15, Dentist is not a party to any material written or oral
agreement contract, lease or arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
the Dentist, oral or written, that provide for prepayments or deferred
installment payments; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Dentist on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(c) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
<PAGE>
(d) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(e) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Dentist since the Balance Sheet
Date;
(f) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(g) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(h) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(i) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(j) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(k) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties,
assets or business or the Business or the Assets, or experienced any other
material adverse change in its financial condition, assets, prospects,
liabilities or business; or
(l) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Other than as set forth on EXHIBIT 2.17, Dentist has
filed all tax returns (including tax reports and other statements) required
to have been filed by it, and has paid all taxes (including any interest,
penalty or additions thereto) required to have been paid by it. All such tax
returns are complete and accurate in all respects and properly reflect the
relevant taxes for the periods covered thereby. Dentist has not received any
notice that any tax deficiency or delinquency has been or may be asserted
against Dentist. There are no audits relating to taxes of Dentist pending or
in process or, to the knowledge of Dentist, threatened. Dentist is not
currently the beneficiary of any waiver of any statute of limitations in
respect of taxes nor of any extension of time within which to file any tax
return or to pay any tax assessment or deficiency. There are no liens or
encumbrances relating to taxes on or threatened against any of the assets of
Dentist. Dentist has withheld and paid all taxes required by law to have been
withheld and paid by it. Neither Dentist nor any predecessor of Dentist is or
has been a party to any tax allocation or sharing agreement or a member of an
affiliated group of corporations filing a consolidated Federal income tax
return. Dentist has delivered to Pentegra correct and complete copies of
Dentist's three most recently filed annual state, local and Federal income
tax returns, together with all examination reports and statements of
deficiencies assessed against or agreed to by Dentist during the three
calendar year period preceding the date of this Agreement. Dentist has
neither made any payments, is obligated to make any payments, or is a party
to any agreement that under any circumstance could obligate it to make any
payments that will not be deductible under Code section 280G.
<PAGE>
(b) Dentist does not intend to dispose of any of the shares of Pentegra
Common Stock to be received hereunder and is not a party to any plan,
arrangement or agreement for the disposition of such shares. Nothing
contained herein shall prohibit Dentist from selling such shares of Pentegra
Common Stock after the designated holding period and in accordance with
SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated
by this Agreement which may be now or hereafter asserted against Pentegra,
Dentist resulting from any action taken by Dentist or their respective agents
or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Dentist did not have, as of the Balance Sheet
Date, and has not incurred since that date and will not have incurred as of
the Closing Date, any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
other than those incurred in the ordinary course of business or as set forth
on EXHIBIT 2.16. Dentist does not know, or have reasonable grounds to know,
of any basis for the assertion against Dentist as of the Balance Sheet Date,
of any claim or liability of any nature in any amount not fully reflected or
reserved against on the Balance Sheet, or of any claim or liability of any
nature arising since that date other than those incurred in the ordinary
course of business or contemplated by this Agreement. All indebtedness of
Dentist (including without limitation, indebtedness for borrowed money,
guaranties and capital lease obligations) is described on EXHIBIT 2.19
attached hereto.
2.20 INSURANCE POLICIES. Dentist and each licensed professional of
Dentist carries property, liability, malpractice, workers' compensation and
such other types of insurance as is customary in the industry. Valid and
enforceable policies in such amounts are outstanding and duly in force and
will remain duly in force through the Closing Date. All such policies are
described in EXHIBIT 2.20 attached hereto and true and correct copies have
been delivered to Pentegra. Dentist has not received notice or other
communication from the issuer of any such insurance policy cancelling or
amending such policy or threatening to do so. Neither Dentist nor any
licensed professional employee of Dentist has any outstanding claims,
settlements or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Dentist has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist
Plan," and collectively "Dentist Plans") have been operated and administered
in all material respects in accordance with all applicable laws, rules and
regulations, including without limitation, ERISA, the Internal Revenue Code
of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment
Act of 1967, as amended, and the related rules and regulations adopted by
those Federal agencies responsible for the administration of such laws. No
act or failure to act by Dentist has resulted in a "prohibited transaction"
(as defined in ERISA) with respect to the Dentist Plans. No "reportable
event" (as defined in ERISA) has occurred with respect to any of the Dentist
Plans. Dentist has not previously made, is not currently making, and is not
obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Dentist Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at least equal to the
value of plan liabilities or (ii) the value of plan liabilities in excess of
plan assets is disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the
Closing Date, a party to any
<PAGE>
agreement or instrument or subject to any charter or other corporate
restriction or any judgment, order, writ, injunction, decree, rule or
regulation that materially and adversely affects the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of
Dentist, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed
professional employees, and the conduct of the Business and use of the
Assets, have complied with all applicable laws, rules, regulations and
licensing requirements, including, without limitation, the Federal
Environmental Protection Act, the Occupational Safety and Health Act, the
Americans with Disabilities Act and any environmental laws and medical waste
laws, and there exist no violations by Dentist or any licensed professional
employee of Dentist of any Federal, state or local law or regulation. Dentist
has not received any notice of a violation of any Federal, state and local
laws, regulations and ordinances relating to the operations of the Business
and Assets and no notice of any pending inspection or violation of any such
law, regulation or ordinance has been received by Dentist.
2.24 THIRD PARTY PAYORS. Dentist and each licensed professional
employee or independent contractor of Dentist has timely filed all claims or
other reports required to be filed with respect to the purchase of services
by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are
no pending appeals, overpayment determinations, adjustments, challenges,
audit, litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Dentist and each
licensed professional employee of Dentist. Neither Dentist nor any licensed
professional employee of Dentist has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Dentist and Dentist's licensed professional employees has not (a) knowingly
and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist
in this Agreement, and no Exhibit or certificate issued or executed by, or
information furnished by Dentist or to be furnished by Dentist to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Dentist has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. Other than
as set forth on EXHIBIT 2.17, no officer or employee or family member of
Dentist, or their respective spouses, children or affiliates, owns directly
or indirectly, on an individual or joint basis, any interest in, has a
compensation or other financial arrangement with, or serves as an officer or
director of, any customer or supplier or competitor of Dentist or any
organization that has a material contract or arrangement with Dentist.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Dentist's services which
accounted for more than 10% of revenues of Dentist in the
<PAGE>
preceding fiscal year. Dentist has good relations with all such payors and
other material payors of Dentist and none of such payors has notified Dentist
that it intends to discontinue its relationship with Dentist or to deny any
claims submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Dentist as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would
not have a material adverse effect, there are no proceedings pending or, to
the knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has knowledge to the continued operation of its business or the use
of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating to
taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened.
<PAGE>
Pentegra is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Dentist pursuant
hereto, or in connection with the transactions contemplated hereby, contains
or will contain any untrue statement of a material fact, or omits or will
omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
SECTION 4. COVENANTS OF DENTIST.
Dentist agrees that between the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and conditions. Dentist agrees to complete the
Exhibits hereto to be provided by him in form and substance satisfactory to
Pentegra.
4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the
Assets in the ordinary course. Dentist shall not enter into any lease,
contract, indebtedness, commitment, purchase or sale or acquire or dispose of
any capital asset relating to the Business or the Assets except in the
ordinary course of business. Dentist shall use their best efforts to preserve
the Business and Assets intact and shall not take any action that would have
an adverse effect on the Business or Assets. Dentist shall use their best
efforts to preserve intact the relationships with payors, customers,
suppliers, patients and others having significant business relations with
Dentist. Dentist shall collect its receivables and pay its trade payables in
the ordinary course of business. Dentist shall not introduce any new method
of management, operations or accounting.
4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized
representatives access to, and make available for inspection, all of the
assets and business of Dentist, the Business and the Assets, including
employees, customers and suppliers and permit Pentegra and its authorized
representatives to inspect and make copies of all documents, records and
information with respect to the business or assets of Dentist, the Business
or the Assets as Pentegra or its representatives may request. Dentist shall
promptly notify Pentegra in writing of (a) any notice or communication
relating to a default or event that, with notice or lapse of time or both,
could become a default, under any contract, commitment or obligation to which
Dentist is a party or relating to the Business or the Assets, and (b) any
adverse change in Dentist's or the Business' financial condition or the
Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall
use his best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions
<PAGE>
contemplated hereby, including consents described on EXHIBIT 2.4. Dentist
shall use his best efforts to obtain all licenses, permits, approvals or
other authorizations required under any law, rule, regulation, or otherwise
to provide the services of the Practice contemplated by the Service Agreement
and to conduct the intended business of the Practice and operate the Business
and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance
with the provisions hereof, Dentist shall not, and shall use its best efforts
to cause Dentist's employees, agents and representatives not to, initiate,
solicit or encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer, including without limitation, any
proposal or offer to the Dentist, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of Dentist or
engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to
such proposal or offer, and Dentist will immediately cease any such
activities, discussions or negotiations heretofore conducted with respect to
any of the foregoing. Dentist shall immediately notify Pentegra if any such
inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Dentist or any entity might have any liability whatsoever
arising from any insurance, pension plan. employment tax or similar liability
of Dentist to any employee or other person or entity (including, without
limitation, any Dentist Plan and any liability under employment contracts
with Dentist) allocable to services performed prior to the Closing Date.
Dentist acknowledges that the purpose and intent of this covenant is to
assure that Pentegra shall have no liability whatsoever at any time after the
Closing Date with respect to any of Dentist's employees or similar persons or
entities, including, without limitation, any Dentist Plan for the period
prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash
compensation of the Dentist (other than in the ordinary course of business)
or other employee (other than in the ordinary course of business) or an
independent contractor of Dentist, adopt, amend or terminate any compensation
plan, employment agreement, independent contractor agreement, employee
policies and procedures or employee benefit plan, take any action that could
deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit
plan, or take any other actions with respect to its employees or employee
matters which might have an adverse effect upon Dentist, its business, assets
or prospects.
4.8 [INTENTIONALLY OMITTED].
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best
efforts to take, or cause to be taken, all actions necessary to effect the
acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material
respect the tax or financial accounting methods or practices followed by
Dentist (including any material change in any assumption underlying, or any
method of calculating, any bad debt, contingency or other reserve), except as
may be required by law or generally accepted accounting principles. Dentist
will duly, accurately and timely (without regard to any extensions of time)
file all returns, information statements and other documents relating to
taxes of Dentist required to be filed by it, and pay all taxes required to be
paid by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby
waive any compliance with the applicable state Bulk Transfers Act, if any.
Dentist covenants and agrees that all of the creditors with respect to the
Business and the Assets will be paid in full by Dentist prior to the Closing
Date, except to
<PAGE>
extent that any liability to such creditors is assumed by Pentegra pursuant
to this Agreement. If required by Pentegra, Dentist shall furnish Pentegra
with proof of payment of all creditors with respect to the Business and the
Assets. Notwithstanding the foregoing, Dentist may dispute the validity or
amount of any such creditor's claim without being deemed to be in violation
of this SECTION 4.11, provided that such dispute is in good faith and does
not unreasonably delay the resolution of the claim and provided, further that
Dentist agrees to indemnify and bond Pentegra for such amounts as is
satisfactory to Pentegra.
4.12 LEASE. If Dentist leases any of its premises from the Dentist or
other affiliate of Dentist, Pentegra shall have entered into a building lease
(the "Building Lease") with the owner of such premises on terms and
conditions satisfactory to Pentegra, the terms and conditions of which shall
include, without limitation, (i) a five year initial term plus three
five-year renewal options, (ii) a lease rate equal to the fair market value
lease rate, as agreed to by Pentegra, and (iii) such other provisions to be
acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made
by Pentegra for the purpose of allowing Pentegra to hire those non-dental
employees of Dentist designated by Pentegra, such employment to be effective
as of the Closing Date. Notwithstanding the above, Dentist shall remain
liable under any Dentist Plans for any claims incurred by any employees or
their spouses or dependents, and for all compensation, bonuses, benefits and
other such items and other liabilities related to Dentist's employees
incurred by Dentist prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all
employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall
be treated as "leased employees" (as defined in Code Section 414(n)) of
Dentist and shall be treated as Clinic employees for purposes of eligibility
and participation in Dentist Plans.
4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective
as of the Closing Date.
4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited
liability company, partnership or other legal entity (the "Practice")
approved by Pentegra for the purpose of practicing dentistry and entering
into the Service Agreement. The Practice shall be duly organized, in existing
and in good standing under the laws of the State in which the Dentist and the
Practice are to practice dentistry. The Practice shall have all necessary
power to own all of its assets and to carry on its business as such business
is now being conducted. The Dentist shall be the sole
member/shareholder/partner of the Practice and own all such interests free of
all security interests, claims, encumbrances and liens. Each interest in the
Practice shall be legally and validly issued and fully paid and
nonassessable. There shall be no outstanding (a) bonds, debentures, notes or
other obligations the holders of which have the right to vote with the
members/partners/shareholders of the Practice on any matter, (b) securities
of the Practice convertible into equity interests in the Practice, or (c)
commitments, options, rights or warrants to issue any such equity interests
in the Practice, to issue securities of the Practice convertible into such
equity interests, or to redeem any securities of the Practice. No interests
of the Practice shall have been issued or disposed of in violation of the
preemptive rights, rights of first refusal or similar rights of any of the
Practice's members/partners/shareholders. The Practice shall quality to do
business as a foreign entity in any other state or jurisdiction by reason of
its business, properties or activities in or relating to such other state or
jurisdiction.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation,
Bylaws/Regulations and minutes of thePractice and all amendments thereto of
the Practice shall have been delivered to Pentegra and shall be in form and
substance satisfactory to Pentegra. The minute books of the Practice shall
contain all accurate minutes of the meetings of and consents to actions taken
without meetings of the members\managers/partners/board of directors of the
Practice since its formation. The books of account of the Practice shall have
been kept accurately in the ordinary course of
<PAGE>
business and the revenues, expenses, assets and liabilities of the Practice
shall have been properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements
and other documents to be executed and delivered by it pursuant to this
Agreement, including without limitation, the Service Agreement and each
Employment Agreement or to be executed and delivered on the Closing Date, and
has taken all action required by law, its Organization/Partnership
Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to
authorize the execution, delivery and performance of such documents. The
Service Agreement, the Employment Agreement and the other agreements
contemplated hereby shall have been duly executed and delivered by the
Practice and constitute or will constitute the legal, valid and binding
obligations of the Practice enforceable against the Practice in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of the
Service Agreement, the Employment Agreements and the other agreements
contemplated hereby will not violate any provision of the organizational
documents of the Practice or any provisions of, or result in the acceleration
of, any obligation under any mortgage, lien, lease, agreement, rent,
instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any
material restrictions of any kind to which the Practice is subject, or result
in any lien or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and has filed with
the proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND DENTIST.
Pentegra and Dentist agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to
promptly prepare and file with the Securities Exchange Commission ("SEC") the
Registration Statement on Form S-1 (or other appropriate Form) to be filed by
Pentegra in connection with its Initial Public Offering (including the
prospectus constituting a part thereof, the "Registration Statement").
Pentegra shall obtain all necessary state securities laws or "Blue Sky"
permits and approvals required to carry out the transactions contemplated by
this Agreement and the Dentist shall furnish all information concerning
Dentist as may be reasonably requested in
<PAGE>
connection with any such action.
Dentist represents and warrants that none of the information or documents
supplied or to be supplied by it specifically for inclusion in the
Registration Statement, by exhibit or otherwise, will, at the time the
Registration Statement and each amendment or supplement thereto, if any,
becomes effective under the Securities Act of 1933, 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, in light of
the circumstances under which they were made, not misleading. Dentist shall
be entitled to review the Registration Statement and each amendment thereto,
if any, prior to the time each becomes effective under the Securities Act of
1933.
Dentist shall furnish Pentegra will all information concerning itself and
such other matters as may be reasonably requested by Pentegra in connection
with the preparation of the Registration Statement and each amendment or
supplement thereto, or any other statement, filing, notice or application
made by or on behalf of each such party or any of its subsidiaries to any
governmental entity in connection with the transactions contemplated by the
Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Dentist contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied
with all covenants and conditions required by this Agreement to be performed
and complied with by Dentist prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Dentist shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Dentist, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service
Agreement"), in substantially the form attached hereto as EXHIBIT 7.7,
pursuant to which Pentegra will provide management services to the Practice.
Dentist shall have executed and delivered a Guaranty Agreement in
substantially the form attached as EXHIBIT 4.10 of the Service Agreement
pursuant to which Dentist shall, among other things, guaranty the obligations
of the Practice under the Service Agreement.
<PAGE>
7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her
employment agreement and executed an employment agreement ("Employment
Agreement") with the Practice in form and substance attached hereto as
EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra.
7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary
government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables
or payables between Dentist and its affiliates and Dentist shall not have any
liabilities, including indebtedness, guaranties and capital leases, that are
not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Dentist shall have named Pentegra as an additional
insured on irs liability insurance program in accordance with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Dentist since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq National Market or other exchange with equal or higher listing
standards selected by Pentegra, subject only to official notification of
issuance.
SECTION 8. DENTIST'S CONDITIONS PRECEDENT.
The obligations of Dentist hereunder are subject to fulfillment at or
prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pentegra contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly
executed in form satisfactory to Dentist and its counsel, referred to in
SECTION 9.2.
8.5 SECURITIES APPROVAL. 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
<PAGE>
issued and no proceedings for that purpose shall have been initiated or
threatened by the SEC. At or prior to the date that the Registration
Statement is declared effective by the SEC, Pentegra shall have received all
state securities and "Blue Sky" permits necessary to consummate the
transactions contemplated hereby. The Pentegra Common Stock shall have been
approved for listing on Nasdaq National Market or other exchange of equal or
higher listing standards selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF DENTIST. Within five business days after requested by
Pentegra, Dentist shall deliver to Pentegra the following, all of which shall
be in a form satisfactory to counsel to Pentegra and shall be held by Jackson
& Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant
to an escrow agreement or letter agreement in form and substance mutually
acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a bill of sale conveying the Assets to Pentegra;
(d) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(e) certificates of Dentist dated as of the Closing Date, (i) as to
the truth and correctness of the representations and warranties of Dentist
contained herein; (ii) as to the performance of and compliance by Dentist
with all covenants contained herein; and (iii) certifying that all conditions
precedent of Dentist to the Closing have been satisfied;
(f) an opinion of counsel to Dentist opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Dentist, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Pentegra;
(g) non-foreign affidavits executed by Dentist;
(h) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(i) an executed Registration Rights Agreement between Pentegra and
Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(j) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Dentist the following, all of which shall be in a form
satisfactory to counsel to Dentist and shall be held by Jackson & Walker,
L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an
escrow agreement or letter agreement in form and substance mutually
acceptable to the parties hereto:
<PAGE>
(a) the Acquisition Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Dentist;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Dentist;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Dentist to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit attached hereto, any agreement executed pursuant hereto, and
any certificate executed and delivered by any party pursuant to the terms of
this Agreement, shall constitute representations and warranties of Dentist or
of Pentegra, as the case may be. All such representations and warranties,
and all representations and warranties expressly labeled as such in this
Agreement shall survive the date of this Agreement and the Closing Date for a
period of five (5) years following the Closing Date, except that (i) the
representations and warranties with respect to environmental and medical
waste laws and health care laws and matters shall survive for a period of
fifteen (15) years and tax representations shall survive until one year after
the expiration of the applicable statute of limitations. Each party
covenants with the other parties not to make any claim with respect to such
representations and warranties, against any party after the date on which
such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof,
unless such party has timely given the notice required in SECTION 10.2, 10.3
or 10.4 hereof, as the case may be. Each party hereby releases, acquits and
discharges the other party from any and all claims and demands,
<PAGE>
actions and causes of action, damages, costs, expenses and rights of setoff
with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as
applicable, are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE
EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND
AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS,
DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL PAY ON BEHALF OF INDEMNITEE ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION
10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS,
SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND
EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR
WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER,
<PAGE>
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR
AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING
HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF
OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY
THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR
AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION,
PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR
THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED
TO PENTEGRA OR ITS COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY
PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING
A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT
OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL
FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE
THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL PAY ON BEHALF OF INDEMNITEE ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the
defense of such action or proceeding, such Indemnified Person shall notify
Indemnitor thereof. If any such action or
<PAGE>
other proceeding shall be brought against any Indemnified Person, Indemnitor
shall, upon written notice given within a reasonable time following receipt
by Indemnitor of such notice from Indemnified Person, be entitled to assume
the defense of such action or proceeding with counsel chosen by Indemnitor
and reasonably satisfactory to Indemnified Person; provided, however, that
any Indemnified Person may at its own expense retain separate counsel to
participate in such defense. Notwithstanding the foregoing, Indemnified
Person shall have the right to employ separate counsel at Indemnitor's
expense and to control its own defense of such action or proceeding if, in
the reasonable opinion of counsel to such Indemnified Person, (a) there are
or may be legal defenses available to such Indemnified Person or to other
Indemnified Persons that are different from or additional to those available
to Indemnitor and which could not be adequately advanced by counsel chosen by
Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor
and such Indemnified Person that would make such separate representation
advisable; provided, however, that in no event shall Indemnitor be required
to pay fees and expenses hereunder for more than one firm of attorneys of
Indemnified Person in any jurisdiction in any one action or proceeding or
group of related actions or proceedings. Indemnitor shall not, without the
prior written consent of any Indemnified Person, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim,
action or proceeding to which such Indemnified Person is a party unless such
settlement, compromise or consent includes an unconditional release of such
Indemnified Person from all liability arising or potentially arising from or
by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Dentist giving rise to
indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be
entitled to offset the amount of damages incurred by it as a result of such
breach of warranty, representation, covenant or agreement against any amounts
payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Dentist
contained in this Agreement or in any certificate or other document executed
and delivered by Dentist pursuant to this Agreement is or becomes untrue or
breached in any material respect or if Dentist fails to comply in any
material respect with any covenant or agreement contained herein, and any
such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
(c) at any time by Dentist if any representation or warranty of Pentegra
contained in this Agreement or in any certificate or other document executed
and delivered by Pentegra pursuant to this Agreement is or becomes untrue or
breached in any material respect or if Pentegra fails to comply in any
material respect with any covenant or agreement contained herein and such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra or Dentist if the transaction contemplated hereby shall
not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Dentist, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
<PAGE>
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares
of Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer
shall be treated as effective for any purpose or (b) engage in any
transaction, whether or not with respect to any shares of Pentegra Common
Stock or any interest therein, the intent or effect of which is to reduce the
risk of owning shares of Pentegra Common Stock. The certificates evidencing
the Pentegra Common Stock delivered to Dentist pursuant to the terms hereof
will bear a legend substantially in the form set forth below and containing
such other information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the
shares of Pentegra Common Stock to be delivered to Dentist pursuant to this
Agreement have not been and will not be registered under the Securities Act
of 1933 and may not be resold without compliance with the Securities Act of
1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this
Agreement is being acquired solely for its own account, for investment
purposes only and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution. Dentist
covenants, warrants and represents that none of the shares of Pentegra Common
Stock issued to it will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after full compliance with all of
the applicable provisions of the Securities Act, as amended, and the rules
and regulations of the Securities Exchange Commission and applicable state
securities laws and regulations. All certificates evidencing shares of
Pentegra Common Stock shall bear the following legend in addition to the
legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock
shall bear any legend required by the securities or blue sky laws of any
state where Dentist resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic
risk of an investment in Pentegra Common Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and has
such knowledge and experience in financial and business matters that they are
capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect its own interests in connection with
the acquisition of the Pentegra Common Stock. Dentist and its
representatives have had an adequate opportunity to ask questions and receive
answers from the officers of Pentegra concerning any and all matters relating
to the background and experience of the officers and directors of Pentegra,
the plans for the operations of the business of Pentegra, and any plans for
additional acquisitions and the like. Dentist and its representatives have
asked any and all questions in the nature described in the preceding sentence
and all questions have been answered to their satisfaction. Dentist is an
"accredited investors" as defined in Regulation D of the Securities Act of
1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes
and acknowledges that it
<PAGE>
had in the past, currently have, and in the future may possibly have, access
to certain confidential information of Pentegra that is valuable, special and
unique assets of Pentegra's businesses. Dentist agrees that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally
through no fault of Dentist, (ii) disclosure is required by law or the order
of any governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), Dentist shall, if
possible, give prior written notice thereof to the other parties hereto, and
provide such other parties hereto with the opportunity to contest such
disclosure, (iii) Dentist reasonably believes that such disclosure is
required in connection with the defense of a lawsuit against the disclosing
party, or (iv) Dentist is the sole and exclusive owner of such confidential
information as a result of the transactions contemplated hereunder or
otherwise. In the event of a breach or threatened breach by Dentist of the
provisions of this SECTION 13, Pentegra shall be entitled to an injunction
restraining Dentist from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting Pentegra from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages. The obligations of the parties under this
SECTION 13 shall survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement, together with the transactions contemplated by the Other
Agreement and the Initial Public Offering, will qualify as an exchange
meeting the requirements of Section 351 of the Code. The tax returns (and
schedules thereto) of Dentist and Pentegra shall be filed in a manner
consistent with such intention and Dentist and Pentegra shall each provide
the other with such tax information, reports, returns or schedules as may be
reasonably required to assist the other in so reporting the transactions
contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Dentist:
To address set forth on EXHIBIT 14.2
<PAGE>
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Dentist for services rendered in
connection with negotiating and closing the transactions contemplated by this
Agreement or the documents to be executed in connection herewith, whether or
not such costs or expenses are incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Dentist.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one
<PAGE>
and the same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any entity
that, through one or more intermediaries is, controlled, controlled by or under
common control with, Pentegra. Upon any such assignment prior to the Closing,
all references herein to Pentegra (including those to Pentegra Common Stock)
shall be deemed to include references to the assignee and the assignee's common
stock. Notwithstanding any such assignment, Pentegra shall not, absent a
written release from Dentist, be relieved from its obligations to Dentist under
this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Dentist, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing, and
signed by the parties hereto. The waiver of any of the terms and conditions of
this Agreement shall not be construed as a waiver of any other terms and
conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist
(hereinafter referred to as a "Party"), whether made before or after the
institution of any legal proceeding, any dispute among the parties hereto in
any way arising out of, related to, or in connection with this Agreement
(hereinafter a "Dispute"), shall be resolved by binding arbitration in
accordance with the terms of this Section (hereinafter the "Arbitration
Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in accordance
with the terms of this Arbitration Program, the Commercial Arbitration Rules of
the AAA. In the event of any inconsistency between this Arbitration Program and
those rules or statutes, then the terms of this Arbitration Program shall
control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or
<PAGE>
foreclosing upon any personal property in which there has been granted a
security interest or lien by a Party in the Documents. In Disputes involving
indebtedness or other monetary obligations, each Party agrees that the other
Party may proceed against all liable persons, jointly and severally against
one or more of them, without impairing rights against other liable persons.
Nor shall a Party be required to join the principal obligor or any other
liable persons (e.g., sureties or guarantors) in any proceeding against a
particular person. A Party may release or settle with one or more liable
persons as the Party deems fit without releasing or impairing rights to
proceed against any persons not so released. All statutes of limitation that
would otherwise be applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoeniz,
Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or by
applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
<PAGE>
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
----------------------------------------
Its: Senior Vice President
----------------------------------------
/s/ David R. Henderson, D.D.S.
--------------------------------------
David R. Henderson, D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 [intentionally omitted]
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Payroll Information; Employment Agreements
2.14 Legal Proceedings
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.17 Taxes
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.27 Ownership Interests of Family Members
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
and
STEPHEN HWANG, D.D.S.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 3
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 3
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 7
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 7
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 8
3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4. COVENANTS OF DENTIST.
4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 9
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 9
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . 10
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 10
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 10
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . . . . . . 10
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 11
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 11
Section 6. COVENANTS OF PENTEGRA AND DENTIST
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 12
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 12
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 12
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 12
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8. DENTIST'S CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 13
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9. CLOSING DELIVERIES
<PAGE>
9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . . . . . . 16
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 17
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 19
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . 20
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . 21
14.12 NO RULE OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . . 21
14.13 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.14 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.15 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.16 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed
as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra") and STEPHEN HWANG, D.D.S. ("Dentist").
WITNESSETH:
WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires
to receive from Dentist, certain assets of Dentist;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Dentist, the "Target Companies");
WHEREAS, it is intended for Federal income tax purposes that the
transfers contemplated by this Agreement, the Other Agreements and Pentegra's
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an
exchange within the meaning of Section 351 of the Internal Revenue Code of
1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and
conditions contained herein, on the Closing Date, Dentist shall convey,
transfer, deliver and assign to Pentegra or any affiliate of Pentegra
designated by Pentegra all of Dentist's right, title and interest in and to
those certain assets described on EXHIBIT 1.1 attached hereto (individually,
"Asset", and collectively "Assets"), free and clear of all obligations,
security interests, claims, liens and encumbrances, except as specifically
assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof.
<PAGE>
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and contributed hereunder, and Dentist shall retain all of its
right, title and interest in and to, the assets not specifically transferred
hereunder, including without limitation, the assets described on EXHIBIT 1.2
(the "Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Dentist
contained herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Dentist the consideration specified
in ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b)
attached hereto to the extent that such obligations, commitments, liabilities
and indebtedness are current and not otherwise in default. (the "Assumed
Liabilities"). Notwithstanding any contrary provision contained herein,
Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i)
any liability, commitment or obligation or trade payable or indebtedness not
specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on
EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default
under such contracts, leases, commitments or obligations which occurred on or
before the Closing Date; (iii) any liability for any employee benefits
payable to employees of Dentist, including, but not limited to, liabilities
arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any
liability based upon or arising out of a violation of any antitrust or
similar restraint-of-trade laws by Dentist, including, without limiting the
generality of the foregoing, any such antitrust liability which may arise in
connection with agreements, contracts, commitments or orders for the sale of
goods or provision of services by Dentist reflected on the books of Dentist
at or prior to the Closing Date; (v) any liability based upon or arising out
of any tortious or wrongful actions of Dentist, any licensed professional
employee or independent contractor of Dentist, (vi) any liability for the
payment of any taxes of Dentist, including without limitation, sales, use and
other transfer taxes and income taxes arising from or by reason of the
transactions contemplated by this Agreement; (vii) any indebtedness secured
by deeds of trust or mortgages on real property; nor (viii) any liability
incurred or to be incurred pursuant to any malpractice or other suits or
actions pending against Dentist.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement, the
Dentist shall execute and deliver all such deeds, bills of sale, assignments
and assurances and take and do all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under the Assets in Pentegra or otherwise to carry
out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
Dentist hereby represents and warrants to Pentegra as follows:
2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the
State of Florida. Dentist does not have any assets, employees or offices in
any state other than the state set forth in the first sentence of this
SECTION 2.1.
2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into
and perform this Agreement and the other agreements to be executed and
delivered in connection herewith. This Agreement
<PAGE>
and all agreements and documents executed and delivered in connection
herewith have been, or will be as of the Closing Date, duly executed and
delivered by Dentist and constitute or will constitute the legal, valid and
binding obligations of Dentist in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of
consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, result in the acceleration of, any obligation
under any mortgage, lien, lease, agreement, rent, instrument, order,
arbitration award, judgment or decree to which Dentist is a party or by which
Dentist is bound, or violate any material restrictions of any kind to which
Dentist is subject, or result in any lien or encumbrance on any of Dentist's
assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to
the knowledge of Dentist, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Dentist.
2.5 [INTENTIONALLY DELETED].
2.6 [INTENTIONALLY DELETED].
2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any
related unaudited statements of income, retained earnings, schedule of
accounts receivable, accounts payable and accrued liabilities, and cash flows
for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Dentist as of
the dates and for the periods indicated and reflect all fixed and contingent
liabilities of Dentist.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Dentist leases, as lessor or lessee, real or personal
property used in operating the Business, related to the Assets or otherwise.
All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance
with their respective terms, and there is not under any such lease any
existing default by Dentist, as lessor or lessee, or any condition or event
of which Dentist has knowledge which with notice or lapse of time, or both,
would constitute a default, in respect of which Dentist has not taken
adequate steps to cure such default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Dentist has no knowledge of any
latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and
marketable title to all
<PAGE>
of the Assets, free and clear of any liens, claims, charges, exceptions or
encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10
attached hereto. Dentist shall cause all encumbrances set forth on EXHIBIT
2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be
released or terminated prior to the Closing Date and evidence of such
releases of liens and claims shall be provided to Pentegra on the Closing
Date and the Assets shall not be used to satisfy such liens, claims or
encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Dentist, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Dentist has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Dentist, including the names of any entities from whom Dentist previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Dentist in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Dentist has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the most recent payroll report of Dentist, showing
all current employees of Dentist and their current levels of compensation,
(b) promised increases in compensation of employees of Dentist that have not
yet been effected, (c) oral or written employment agreements, consulting
agreements or independent contractor agreements (and all amendments thereto)
to which Dentist is a party, copies of which have been delivered to Pentegra,
and (d) all employee manuals, materials, policies, procedures and
work-related rules, copies of which have been delivered to Pentegra. Dentist
is in compliance with all applicable laws, rules, regulations and ordinances
respecting employment and employment practices. Dentist has not engaged in
any unfair labor practice. There are no unfair labor practices charges or
complaints pending or threatened against Dentist, and Dentist has never been
a party to any agreement with any union, labor organization or collective
bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the
Assets is subject to any pending, nor does Dentist have knowledge of any
threatened, litigation, governmental investigation, condemnation or other
proceeding against or relating to or affecting Dentist, the Business, the
Assets or the transactions contemplated by this Agreement, and, to the
knowledge of Dentist, no basis for any such action exists, nor is there any
legal impediment of which Dentist has knowledge to the continued operation of
its business or the use of the Assets in the ordinary course, subject to
consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Dentist ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted or may be made
by any party thereto.
<PAGE>
Except as indicated on such Exhibits, there is not under any such Contract
any existing default by Dentist, or any condition or event of which Dentist
has knowledge which with notice or lapse of time, or both, would constitute a
default. Dentist has no knowledge of any default by any other party to such
Contracts. Dentist has not received notice of the intention of any party to
any Contract to cancel or terminate any Contract and have no reason to
believe that any amendment or change to any Contract is contemplated by any
party thereto. Other than those contracts, obligations and commitments
listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist is not a party
to any material written or oral agreement contract, lease or arrangement,
including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
the Dentist, oral or written, that provide for prepayments or deferred
installment payments; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Dentist on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16,
Dentist has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(c) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
<PAGE>
(d) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(e) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Dentist since the Balance Sheet
Date;
(f) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(g) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(h) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(i) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(j) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(k) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties,
assets or business or the Business or the Assets, or experienced any other
material adverse change in its financial condition, assets, prospects,
liabilities or business; or
(l) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Dentist has not received any notice that any tax deficiency or
delinquency has been or may be asserted against Dentist. There are no
audits relating to taxes of Dentist pending or in process or, to the
knowledge of Dentist, threatened. Dentist is not currently the beneficiary of
any waiver of any statute of limitations in respect of taxes nor of any
extension of time within which to file any tax return or to pay any tax
assessment or deficiency. There are no liens or encumbrances relating to
taxes on or threatened against any of the assets of Dentist. Dentist has
withheld and paid all taxes required by law to have been withheld and paid by
it. Neither Dentist nor any predecessor of Dentist is or has been a party to
any tax allocation or sharing agreement or a member of an affiliated group of
corporations filing a consolidated Federal income tax return. Dentist has
delivered to Pentegra correct and complete copies of Dentist's three most
recently filed annual state, local and Federal income tax returns, together
with all examination reports and statements of deficiencies assessed against
or agreed to by Dentist during the three calendar year period preceding the
date of this Agreement. Dentist has neither made any payments, is obligated
to make any payments, or is a party to any agreement that under any
circumstance could obligate it to make any payments that will not be
deductible under Code section 280G.
(b) Dentist does not intend to dispose of any of the shares of Pentegra
Common Stock to be received hereunder and is not a party to any plan,
arrangement or agreement for the disposition of such shares.
<PAGE>
Nothing contained herein shall prohibit Dentist from selling such shares of
Pentegra Common Stock after the designated holding period and in accordance
with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated
by this Agreement which may be now or hereafter asserted against Pentegra,
Dentist resulting from any action taken by Dentist or their respective agents
or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Dentist did not have, as of the Balance Sheet
Date, and has not incurred since that date and will not have incurred as of
the Closing Date, any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
other than those incurred in the ordinary course of business or as set forth
on EXHIBIT 2.16. Dentist does not know, or have reasonable grounds to know,
of any basis for the assertion against Dentist as of the Balance Sheet Date,
of any claim or liability of any nature in any amount not fully reflected or
reserved against on the Balance Sheet, or of any claim or liability of any
nature arising since that date other than those incurred in the ordinary
course of business or contemplated by this Agreement. All indebtedness of
Dentist (including without limitation, indebtedness for borrowed money,
guaranties and capital lease obligations) is described on EXHIBIT 2.19
attached hereto.
2.20 INSURANCE POLICIES. Dentist and each licensed professional of
Dentist carries property, liability, malpractice, workers' compensation and
such other types of insurance as is customary in the industry. Valid and
enforceable policies in such amounts are outstanding and duly in force and
will remain duly in force through the Closing Date. All such policies are
described in EXHIBIT 2.20 attached hereto and true and correct copies have
been delivered to Pentegra. Dentist has not received notice or other
communication from the issuer of any such insurance policy cancelling or
amending such policy or threatening to do so. Neither Dentist nor any
licensed professional employee of Dentist has any outstanding claims,
settlements or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Dentist has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist
Plan," and collectively "Dentist Plans") have been operated and administered
in all material respects in accordance with all applicable laws, rules and
regulations, including without limitation, ERISA, the Internal Revenue Code
of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment
Act of 1967, as amended, and the related rules and regulations adopted by
those Federal agencies responsible for the administration of such laws. No
act or failure to act by Dentist has resulted in a "prohibited transaction"
(as defined in ERISA) with respect to the Dentist Plans. No "reportable
event" (as defined in ERISA) has occurred with respect to any of the Dentist
Plans. Dentist has not previously made, is not currently making, and is not
obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Dentist Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at least equal to the
value of plan liabilities or (ii) the value of plan liabilities in excess of
plan assets is disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing
Date, a party to any agreement or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree, rule or
regulation that materially and adversely affects the condition (financial or
<PAGE>
otherwise), operations, assets, liabilities, business or prospects of
Dentist, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed
professional employees, and the conduct of the Business and use of the
Assets, have complied with all applicable laws, rules, regulations and
licensing requirements, including, without limitation, the Federal
Environmental Protection Act, the Occupational Safety and Health Act, the
Americans with Disabilities Act and any environmental laws and medical waste
laws, and there exist no violations by Dentist or any licensed professional
employee of Dentist of any Federal, state or local law or regulation.
Dentist has not received any notice of a violation of any Federal, state and
local laws, regulations and ordinances relating to the operations of the
Business and Assets and no notice of any pending inspection or violation of
any such law, regulation or ordinance has been received by Dentist.
2.24 THIRD PARTY PAYORS. Dentist and each licensed professional
employee or independent contractor of Dentist has timely filed all claims or
other reports required to be filed with respect to the purchase of services
by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are
no pending appeals, overpayment determinations, adjustments, challenges,
audit, litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Dentist and each
licensed professional employee of Dentist. Neither Dentist nor any licensed
professional employee of Dentist has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Dentist and Dentist's licensed professional employees has not (a) knowingly
and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist
in this Agreement, and no Exhibit or certificate issued or executed by, or
information furnished by Dentist or to be furnished by Dentist to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Dentist has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer
or employee or family member of Dentist, or their respective spouses,
children or affiliates, owns directly or indirectly, on an individual or
joint basis, any interest in, has a compensation or other financial
arrangement with, or serves as an officer or director of, any customer or
supplier or competitor of Dentist or any organization that has a material
contract or arrangement with Dentist.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Dentist's services which
accounted for more than 10% of revenues of Dentist in the preceding fiscal
year. Dentist has good relations with all such payors and other material
payors of Dentist and none of such payors has notified Dentist that it
intends to discontinue its relationship with Dentist or to deny
<PAGE>
any claims submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Dentist as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would
not have a material adverse effect, there are no proceedings pending or, to
the knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has knowledge to the continued operation of its business or the use
of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
<PAGE>
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Dentist pursuant
hereto, or in connection with the transactions contemplated hereby, contains
or will contain any untrue statement of a material fact, or omits or will
omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
SECTION 4. COVENANTS OF DENTIST.
Dentist agrees that between the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and conditions. Dentist agrees to complete the
Exhibits hereto to be provided by him in form and substance satisfactory to
Pentegra.
4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the
Assets in the ordinary course. Dentist shall not enter into any lease,
contract, indebtedness, commitment, purchase or sale or acquire or dispose of
any capital asset relating to the Business or the Assets except in the
ordinary course of business. Dentist shall use their best efforts to
preserve the Business and Assets intact and shall not take any action that
would have an adverse effect on the Business or Assets. Dentist shall use
their best efforts to preserve intact the relationships with payors,
customers, suppliers, patients and others having significant business
relations with Dentist. Dentist shall collect its receivables and pay its
trade payables in the ordinary course of business. Dentist shall not
introduce any new method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized
representatives access to, and make available for inspection, all of the
assets and business of Dentist, the Business and the Assets, including
employees, customers and suppliers and permit Pentegra and its authorized
representatives to inspect and make copies of all documents, records and
information with respect to the business or assets of Dentist, the Business
or the Assets as Pentegra or its representatives may request. Dentist shall
promptly notify Pentegra in writing of (a) any notice or communication
relating to a default or event that, with notice or lapse of time or both,
could become a default, under any contract, commitment or obligation to which
Dentist is a party or relating to the Business or the Assets, and (b) any
adverse change in Dentist's or the Business' financial condition or the
Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall
use his best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby,
including consents described on EXHIBIT 2.4. Dentist shall use his best
efforts to obtain all licenses, permits, approvals or other authorizations
required under any law, rule, regulation, or otherwise to provide the
services of the Practice contemplated by the Service Agreement and to conduct
the intended business of the Practice and operate the Business and use the
Assets.
<PAGE>
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of Closing or the termination of this Agreement in accordance with the
provisions hereof, Dentist shall not, and shall use its best efforts to cause
Dentist's employees, agents and representatives not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making or implementation
of any proposal or offer, including without limitation, any proposal or offer to
the Dentist, with respect to a merger, acquisition, consolidation or similar
transaction involving, or the purchase of all or any significant portion of the
assets or any equity securities of Dentist or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to such proposal or offer, and Dentist
will immediately cease any such activities, discussions or negotiations
heretofore conducted with respect to any of the foregoing. Dentist shall
immediately notify Pentegra if any such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund completely
for any accrued benefits, where applicable, or vested accrued benefits for which
Dentist or any entity might have any liability whatsoever arising from any
insurance, pension plan, employment tax or similar liability of Dentist to any
employee or other person or entity (including, without limitation, any Dentist
Plan and any liability under employment contracts with Dentist) allocable to
services performed prior to the Closing Date. Dentist acknowledges that the
purpose and intent of this covenant is to assure that Pentegra shall have no
liability whatsoever at any time after the Closing Date with respect to any of
Dentist's employees or similar persons or entities, including, without
limitation, any Dentist Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of the Dentist (other than in the ordinary course of business) or other employee
or an independent contractor of Dentist, adopt, amend or terminate any
compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect upon Dentist, its business, assets or
prospects.
4.8 [INTENTIONALLY OMITTED].
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best
efforts to take, or cause to be taken, all actions necessary to effect the
acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material
respect the tax or financial accounting methods or practices followed by Dentist
(including any material change in any assumption underlying, or any method of
calculating, any bad debt, contingency or other reserve), except as may be
required by law or generally accepted accounting principles. Dentist will
duly, accurately and timely (without regard to any extensions of time) file all
returns, information statements and other documents relating to taxes of Dentist
required to be filed by it, and pay all taxes required to be paid by it, on or
before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive
any compliance with the applicable state Bulk Transfers Act, if any. Dentist
covenants and agrees that all of the creditors with respect to the Business and
the Assets will be paid in full by Dentist prior to the Closing Date, except to
extent that any liability to such creditors is assumed by Pentegra pursuant to
this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with
proof of payment of all creditors with respect to the Business and the Assets.
Notwithstanding the foregoing, Dentist may dispute the validity or amount of any
such creditor's claim without being deemed to be in violation of this SECTION
4.11, provided that such dispute is in good faith and does not unreasonably
delay the resolution of the claim and provided, further that Dentist agrees to
<PAGE>
indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Dentist leases any of its premises from the Dentist or
other affiliate of Dentist, Pentegra shall have entered into a building lease
(the "Building Lease") with the owner of such premises on terms and conditions
satisfactory to Pentegra, the terms and conditions of which shall include,
without limitation, (i) a five year initial term plus three five-year renewal
options, (ii) a lease rate equal to the fair market value lease rate, as agreed
to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made
by Pentegra for the purpose of allowing Pentegra to hire those non-dental
employees of Dentist designated by Pentegra, such employment to be effective as
of the Closing Date. Notwithstanding the above, Dentist shall remain liable
under any Dentist Plans for any claims incurred by any employees or their
spouses or dependents, and for all compensation, bonuses, benefits and other
such items and other liabilities related to Dentist's employees incurred by
Dentist prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all
employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be
treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and
shall be treated as Clinic employees for purposes of eligibility and
participation in Dentist Plans.
4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective as
of the Closing Date.
4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited
liability company, partnership or other legal entity (the "Practice") approved
by Pentegra for the purpose of practicing dentistry and entering into the
Service Agreement. The Practice shall be duly organized, in existing and in
good standing under the laws of the State in which the Dentist and the Practice
are to practice dentistry. The Practice shall have all necessary power to own
all of its assets and to carry on its business as such business is now being
conducted. The Dentist shall be the sole member/shareholder/partner of the
Practice and own all such interests free of all security interests, claims,
encumbrances and liens. Each interest in the Practice shall be legally and
validly issued and fully paid and nonassessable. There shall be no outstanding
(a) bonds, debentures, notes or other obligations the holders of which have the
right to vote with the members/partners/shareholders of the Practice on any
matter, (b) securities of the Practice convertible into equity interests in the
Practice, or (c) commitments, options, rights or warrants to issue any such
equity interests in the Practice, to issue securities of the Practice
convertible into such equity interests, or to redeem any securities of the
Practice. No interests of the Practice shall have been issued or disposed of in
violation of the preemptive rights, rights of first refusal or similar rights of
any of the Practice's members/partners/shareholders. The Practice shall quality
to do business as a foreign entity in any other state or jurisdiction by reason
of its business, properties or activities in or relating to such other state or
jurisdiction.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations
and minutes of thePractice and all amendments thereto of the Practice shall have
been delivered to Pentegra and shall be in form and substance satisfactory to
Pentegra. The minute books of the Practice shall contain all accurate minutes
of the meetings of and consents to actions taken without meetings of the
members\managers/partners/board of directors of the Practice since its
formation. The books of account of the Practice shall have been kept accurately
in the ordinary course of business and the revenues, expenses, assets and
liabilities of the Practice shall have been properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements and
other documents to be executed and delivered by
<PAGE>
it pursuant to this Agreement, including without limitation, the Service
Agreement and each Employment Agreement or to be executed and delivered on
the Closing Date, and has taken all action required by law, its
Organization/Partnership Agreement/Articles of Incorporation, its
Bylaws/Regulations or otherwise, to authorize the execution, delivery and
performance of such documents. The Service Agreement, the Employment
Agreement and the other agreements contemplated hereby shall have been duly
executed and delivered by the Practice and constitute or will constitute the
legal, valid and binding obligations of the Practice enforceable against the
Practice in accordance with their respective terms, except as may be limited
by applicable bankruptcy, insolvency or similar laws affecting creditors'
rights generally or the availability of equitable remedies. The execution
and delivery of the Service Agreement, the Employment Agreements and the
other agreements contemplated hereby will not violate any provision of the
organizational documents of the Practice or any provisions of, or result in
the acceleration of, any obligation under any mortgage, lien, lease,
agreement, rent, instrument, order, arbitration award, judgment or decree to
which the Practice is a party or by which the Practice is bound, or violate
any material restrictions of any kind to which the Practice is subject, or
result in any lien or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and has filed with the
proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND DENTIST.
Pentegra and Dentist agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to
promptly prepare and file with the Securities Exchange Commission ("SEC") the
Registration Statement on Form S-1 (or other appropriate Form) to be filed by
Pentegra in connection with its Initial Public Offering (including the
prospectus constituting a part thereof, the "Registration Statement"). Pentegra
shall obtain all necessary state securities laws or "Blue Sky" permits and
approvals required to carry out the transactions contemplated by this Agreement
and the Dentist shall furnish all information concerning Dentist as may be
reasonable requested in connection with any such action.
Dentist represents and warrants that none of the information or documents
supplied or to be supplied by it specifically for inclusion in the Registration
Statement, by exhibit or otherwise, will, at the time the
<PAGE>
Registration Statement and each amendment or supplement thereto, if any,
becomes effective under the Securities Act of 1933, 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, in light of
the circumstances under which they were made, not misleading. Dentist shall
be entitled to review the Registration Statement and each amendment thereto,
if any, prior to the time each becomes effective under the Securities Act of
1933.
Dentist shall furnish Pentegra will all information concerning itself and
such other matters as may be reasonable requested by Pentegra in connection with
the preparation of the Registration Statement and each amendment or supplement
thereto, or any other statement, filing, notice or application made by or on
behalf of each such party or any of its subsidiaries to any governmental entity
in connection with the transactions contemplated by the Other Agreements or this
Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at or
prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Dentist contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Dentist prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Dentist shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Dentist, the Business and the Assets, the results of which shall
be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service Agreement"),
in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which
Pentegra will provide management services to the Practice. Dentist shall have
executed and delivered a Guaranty Agreement in substantially the form attached
as EXHIBIT 4.10 of the Service Agreement pursuant to which Dentist shall, among
other things, guaranty the obligations of the Practice under the Service
Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her
employment agreement and executed an employment agreement ("Employment
Agreement") with the Practice in form and substance attached hereto as EXHIBIT
7.8 and otherwise satisfactory to Dentist and Pentegra.
<PAGE>
7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary
government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly
executed in form satisfactory to Pentegra and its counsel, referred to in
SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or
payables between Dentist and its affiliates and Dentist shall not have any
liabilities, including indebtedness, guaranties and capital leases, that are not
set forth on EXHIBIT 2.19.
7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured
on irs liability insurance program in accordance with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Dentist since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. DENTIST'S CONDITIONS PRECEDENT.
The obligations of Dentist hereunder are subject to fulfillment at or prior
to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Pentegra contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly
executed in form satisfactory to Dentist and its counsel, referred to in SECTION
9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by
<PAGE>
Pentegra, subject only to official notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF DENTIST. Within five business days after requested by
Pentegra, Dentist shall deliver to Pentegra the following, all of which shall be
in a form satisfactory to counsel to Pentegra and shall be held by Jackson &
Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an
escrow agreement or letter agreement in form and substance mutually acceptable
to the parties hereto:
(a) an executed original Service Agreement and executed originals of
all documents required by that agreement, including but not limited to the
Guaranty Agreemen and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a bill of sale conveying the Assets to Pentegra;
(d) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(e) certificates of Dentist dated as of the Closing Date, (i) as to
the truth and correctness of the representations and warranties of Dentist
contained herein; (ii) as to the performance of and compliance by Dentist with
all covenants contained herein; and (iii) certifying that all conditions
precedent of Dentist to the Closing have been satisfied;
(f) an opinion of counsel to Dentist opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Dentist, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Pentegra;
(g) non-foreign affidavits executed by Dentist;
(h) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(i) an executed Registration Rights Agreement between Pentegra and
Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(j) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall
deliver to Dentist the following, all of which shall be in a form satisfactory
to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for
Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter
agreement in form and substance mutually acceptable to the parties hereto:
(a) the Acquisition Consideration;
(b) an executed Service Agreement;
<PAGE>
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance of
this Agreement and all related documents and agreements each certified by the
Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii) certifying
that all conditions precedent of Pentegra to the Closing have been satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and the
State of incorporation of Dentist;
(h) an opinion of counsel to Pentegra opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Pentegra, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Dentist;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Dentist to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in
any Exhibit attached hereto, any agreement executed pursuant hereto, and any
certificate executed and delivered by any party pursuant to the terms of this
Agreement, shall constitute representations and warranties of Dentist or of
Pentegra, as the case may be. All such representations and warranties, and all
representations and warranties expressly labeled as such in this Agreement shall
survive the date of this Agreement and the Closing Date for a period of five (5)
years following the Closing Date, except that (i) the representations and
warranties with respect to environmental and medical waste laws and health care
laws and matters shall survive for a period of fifteen (15) years and tax
representations shall survive until one year after the expiration of the
applicable statute of limitations. Each party covenants with the other parties
not to make any claim with respect to such representations and warranties,
against any party after the date on which such survival period shall terminate.
No party shall be entitled to claim indemnity from any other party pursuant to
SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice
required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party
hereby releases, acquits and discharges the other party from any and all claims
and demands, actions and causes of action, damages, costs, expenses and rights
of setoff with respect to which the notices required by SECTION 10.2, 10.3 or
10.4, as applicable, are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2
<PAGE>
AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING,
INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT
APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST
ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES
AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY
PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF,
OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION
10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS
AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS
SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED
PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS,
DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT
LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING
FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND
<PAGE>
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR AFTER
THE CLOSING DATE,
(D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE
FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING
FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY
PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR
AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION,
PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE
OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS
COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS,
THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the defense
of such action or proceeding, such Indemnified Person shall notify Indemnitor
thereof. If any such action or other proceeding shall be brought against any
Indemnified Person, Indemnitor shall, upon written notice given within a
reasonable time following receipt by Indemnitor of such notice from Indemnified
Person, be entitled to assume the defense of such action or proceeding with
counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person;
provided, however, that any Indemnified Person may at its own expense
<PAGE>
retain separate counsel to participate in such defense. Notwithstanding the
foregoing, Indemnified Person shall have the right to employ separate counsel
at Indemnitor's expense and to control its own defense of such action or
proceeding if, in the reasonable opinion of counsel to such Indemnified
Person, (a) there are or may be legal defenses available to such Indemnified
Person or to other Indemnified Persons that are different from or additional
to those available to Indemnitor and which could not be adequately advanced
by counsel chosen by Indemnitor, or (b) a conflict or potential conflict
exists between Indemnitor and such Indemnified Person that would make such
separate representation advisable; provided, however, that in no event shall
Indemnitor be required to pay fees and expenses hereunder for more than one
firm of attorneys of Indemnified Person in any jurisdiction in any one action
or proceeding or group of related actions or proceedings. Indemnitor shall
not, without the prior written consent of any Indemnified Person, settle or
compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding to which such Indemnified Person is a
party unless such settlement, compromise or consent includes an unconditional
release of such Indemnified Person from all liability arising or potentially
arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Dentist giving rise to indemnification
under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset
the amount of damages incurred by it as a result of such breach of warranty,
representation, covenant or agreement against any amounts payable by Pentegra,
including the amounts payable under the Service Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Dentist
contained in this Agreement or in any certificate or other document executed and
delivered by Dentist pursuant to this Agreement is or becomes untrue or breached
in any material respect or if Dentist fails to comply in any material respect
with any covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
(c) at any time by Dentist if any representation or warranty of Pentegra
contained in this Agreement or in any certificate or other document executed and
delivered by Pentegra pursuant to this Agreement is or becomes untrue or
breached in any material respect or if Pentegra fails to comply in any material
respect with any covenant or agreement contained herein and such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra or Dentist if the transaction contemplated hereby shall
not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Dentist, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date,
Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber,
pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra
Common Stock received by such party hereunder, (ii) any interest (including
without limitation, an option to buy or sell) in any shares of Pentegra Common
Stock, in whole or in part, and
<PAGE>
no such attempted transfer shall be treated as effective for any purpose or
(b) engage in any transaction, whether or not with respect to any shares of
Pentegra Common Stock or any interest therein, the intent or effect of which
is to reduce the risk of owning shares of Pentegra Common Stock. The
certificates evidencing the Pentegra Common Stock delivered to Dentist
pursuant to the terms hereof will bear a legend substantially in the form set
forth below and containing such other information as Pentegra may deem
necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the
shares of Pentegra Common Stock to be delivered to Dentist pursuant to this
Agreement have not been and will not be registered under the Securities Act of
1933 and may not be resold without compliance with the Securities Act of 1933.
The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement
is being acquired solely for its own account, for investment purposes only and
with no present intention of distributing, selling or otherwise disposing of it
in connection with a distribution. Dentist covenants, warrants and represents
that none of the shares of Pentegra Common Stock issued to it will be offered,
sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
except after full compliance with all of the applicable provisions of the
Securities Act, as amended, and the rules and regulations of the Securities
Exchange Commission and applicable state securities laws and regulations. All
certificates evidencing shares of Pentegra Common Stock shall bear the following
legend in addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Dentist resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic
risk of an investment in Pentegra Common Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and has such
knowledge and experience in financial and business matters that they are capable
of evaluating the merits and risks of the proposed investment and therefore have
the capacity to protect its own interests in connection with the acquisition of
the Pentegra Common Stock. Dentist and its representatives have had an adequate
opportunity to ask questions and receive answers from the officers of Pentegra
concerning any and all matters relating to the background and experience of the
officers and directors of Pentegra, the plans for the operations of the business
of Pentegra, and any plans for additional acquisitions and the like. Dentist
and its representatives have asked any and all questions in the nature described
in the preceding sentence and all questions have been answered to their
satisfaction. Dentist is an "accredited investors" as defined in Regulation D
of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes
and acknowledges that it had in the past, currently have, and in the future may
possibly have, access to certain confidential information of Pentegra that is
valuable, special and unique assets of Pentegra's businesses. Dentist agrees
that it will not disclose such confidential information to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
unless (i) such information becomes available to or known by the public
<PAGE>
generally through no fault of Dentist, (ii) disclosure is required by law or
the order of any governmental authority under color of law, provided, that
prior to disclosing any information pursuant to this clause (ii), Dentist
shall, if possible, give prior written notice thereof to the other parties
hereto, and provide such other parties hereto with the opportunity to contest
such disclosure, (iii) Dentist reasonably believes that such disclosure is
required in connection with the defense of a lawsuit against the disclosing
party, or (iv) Dentist is the sole and exclusive owner of such confidential
information as a result of the transactions contemplated hereunder or
otherwise. In the event of a breach or threatened breach by Dentist of the
provisions of this SECTION 13, Pentegra shall be entitled to an injunction
restraining Dentist from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting Pentegra from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages. The obligations of the parties under this
SECTION 13 shall survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement, together with the transactions contemplated by the Other
Agreement and the Initial Public Offering, will qualify as an exchange meeting
the requirements of Section 351 of the Code. The tax returns (and schedules
thereto) of Dentist and Pentegra shall be filed in a manner consistent with
such intention and Dentist and Pentegra shall each provide the other with such
tax information, reports, returns or schedules as may be reasonably required to
assist the other in so reporting the transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery, or by
facsimile AND overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Dentist:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
<PAGE>
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this Agreement,
whether or not such transactions are consummated. Without limiting the
generality of the foregoing and whether or not such liabilities may be deemed to
have been incurred in the ordinary course of business, Pentegra shall not be
liable to or required to pay, either directly or indirectly, any fees and
expenses of legal counsel, accountants, auditors or other persons or entities
retained by Dentist for services rendered in connection with negotiating and
closing the transactions contemplated by this Agreement or the documents to be
executed in connection herewith, whether or not such costs or expenses are
incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure, either
written or oral, regarding the transactions contemplated by this Agreement
without the prior written consent of the other party, provided that the
foregoing shall not prohibit any disclosure (a) by press release, filing or
otherwise that Pentegra has determined in good faith judgment to be required by
Federal securities laws or the rules of the National Association of Securities
Dealers, (b) to attorneys, accountants, investment bankers or other agents of
the parties assisting the parties in connection with the transactions
contemplated by this Agreement, and (c) by Pentegra in connection with the
conduct of its Initial Public Offering and conducting an examination of the
operations and assets of Dentist.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are
integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and not
only in connection with the specific representation in which they are explicitly
referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS
ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY
AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR
ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one and the same
instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or
<PAGE>
have any right under or by virtue of this Agreement. No party may assign any
right or obligation hereunder without the prior written consent of the other
parties; provided, however, that Pentegra may assign its rights and delegate
its obligations hereunder to any entity that is an affiliate of Pentegra.
For purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Dentist, be relieved from its obligations
to Dentist under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Dentist, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing, and
signed by the parties hereto. The waiver of any of the terms and conditions of
this Agreement shall not be construed as a waiver of any other terms and
conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist
(hereinafter referred to as a "Party"), whether made before or after the
institution of any legal proceeding, any dispute among the parties hereto in
any way arising out of, related to, or in connection with this Agreement
(hereinafter a "Dispute"), shall be resolved by binding arbitration in
accordance with the terms of this Section (hereinafter the "Arbitration
Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in accordance
with the terms of this Arbitration Program, the Commercial Arbitration Rules of
the AAA. In the event of any inconsistency between this Arbitration Program and
those rules or statutes, then the terms of this Arbitration Program shall
control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been completed
and the arbitrators have determined each party's post-arbitration obligations
and responsibilities as it relates to such warranties and covenants. No
provision of, nor the exercise of any rights under, this Arbitration Program
shall limit the right of any Party at any time to seek or use ancillary or
preliminary judicial or non-judicial self help remedies for the purposes of
obtaining, perfecting, preserving, or foreclosing upon any personal property in
which there has been granted a security interest or lien by a Party in the
Documents. In Disputes involving indebtedness or other monetary obligations,
each Party agrees that the other Party may proceed against all liable persons,
jointly and severally against one or more of them, without impairing rights
against other liable persons. Nor shall a Party be required to join the
principal obligor or any other liable persons (e.g., sureties or guarantors) in
any proceeding against a particular person. A Party may release or settle
<PAGE>
with one or more liable persons as the Party deems fit without releasing or
impairing rights to proceed against any persons not so released. All
statutes of limitation that would otherwise be applicable shall apply to any
arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing, of
that Party's desire to arbitrate a dispute; and each Party shall, within twenty
(20) days from the date such notification is received, select an arbitrator, and
those two arbitrators shall select a third arbitrator within ten (10) days
thereafter. The issues or claims in dispute shall be committed to writing,
separately stated and numbered, and each party's proposed answers or contentions
shall be signed below the questions. Failure by a party to select an arbitrator
within the prescribed time period shall serve as that Party's acquiescence and
acceptance of the other party's selection of arbitrator. The arbitrators shall
resolve all Disputes in accordance with the applicable substantive law. Any
Dispute shall be decided by a majority vote of three arbitrators, unless the
claim or amount in controversy does not exceed $100,000.00, in which case a
single arbitrator (who shall have authority to render a maximum award of
$100,000.00, including all damages of any kind, costs and fees) may decide the
Dispute. The arbitrators may grant any remedy or relief that the arbitrators
deem just and equitable and within the scope of this Arbitration Program. The
arbitrators may also grant such ancillary relief as is necessary to make
effective the award. In all arbitration proceedings the arbitrators shall make
specific and written findings of fact and conclusions of law. In all
arbitration proceedings in which the amount in controversy exceeds $100,000.00,
in the aggregate, the Parties shall have in addition to the statutory right to
seek vacation or modification of any award pursuant to applicable law, the right
to seek vacation or modification of any award that is based in whole, or in
part, on an incorrect or erroneous ruling of law by appeal to an appropriate
court having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must be
filed in a court having jurisdiction over the Dispute within 15 days from the
date the award in rendered. The arbitrators' findings of fact shall be binding
on all Parties and shall not be subject to further review except as otherwise
allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in writing
by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the
headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this
Arbitration Program shall survive any termination, amendment, or expiration of
the Documents, unless the Parties otherwise expressly agree in writing making
specific reference to this Arbitration Program. To the extent permitted by
applicable law, the arbitrator shall have the power to award recovery of all
costs and fees (including attorney's fees, administrative fees, and arbitrators'
fees) to the prevailing Party. This Arbitration Program may be amended,
changed, or modified only by a writing which specifically refers to this
Arbitration Program and which is signed by all the Parties. If any term,
covenant, condition or provision of the Arbitration Program is found to be
unlawful or invalid or unenforceable, such illegality or invalidity or
unenforceable shall not affect the legality, validity or enforceability of the
remaining parts of this Arbitration Program, and all such remaining parts hereof
shall be valid and enforceable and have full force and effect as if the illegal,
invalid or unenforceable part had not been included. Each Party agrees to keep
all Disputes and arbitration proceedings strictly confidential, except for
disclosures of information required in the ordinary course of business of the
Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be found
to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect. In lieu of such
provision, there shall be added automatically as part of this Agreement, a
provision as similar in its terms to such provision as may be possible and be
legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
------------------------------
Its: Senior Vice President
-----------------------------
/s/ Stephen Hwang, D.D.S.
---------------------------------
Stephen Hwang, D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 [intentionally omitted]
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Encumbrances
2.12 Patents and Trademarks; Names
2.13 Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
JACKSON DENTAL PARTNERSHIP,
and
PENN JACKSON, SR.
and
PENN JACKSON, JR.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . .2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND PARTNERS.
2.1 EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . . . . . . .2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . .3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . .3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . .3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . .3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . .4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . .4
2.13 PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . .4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . .8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . .8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . .8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . .9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . .9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . .9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Section 4. COVENANTS OF CONTRIBUTOR AND PARTNERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 10
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 12
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 12
Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND PARTNERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 12
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 13
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 13
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8. CONTRIBUTOR'S AND PARTNERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 14
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 14
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF CONTRIBUTOR AND PARTNERS. . . . . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY CONTRIBUTOR AND PARTNERS . . . . . . . . . . . . . . . 17
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 18
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 19
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 19
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . 21
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . 21
14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed
as August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware
corporation ("Pentegra"), JACKSON DENTAL PARTNERSHIP, a Texas partnership
("Contributor") and PENN JACKSON, SR. and PENN JACKSON, JR., partners of
Contributor (referred to herein as "Partner" or "Partners").
WITNESSETH:
WHEREAS, Contributor operates a dental practice ("Business") and Pentegra
is engaged in the business of managing certain non-dentistry aspects of
dental practices;
WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra
desires to receive from Contributor, certain assets of Contributor;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Contributor, the "Target
Companies");
WHEREAS, it is intended for Federal income tax purposes that the
transfers contemplated by this Agreement, the Other Agreements and Pentegra's
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an
exchange within the meaning of Section 351 of the Internal Revenue Code of
1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and
conditions contained herein, on the Closing Date, Contributor shall convey,
transfer, deliver and assign to Pentegra or any affiliate of Pentegra
designated by Pentegra all of Contributor's right, title and interest in and
to those certain assets described on EXHIBIT 1.1 attached hereto
(individually, "Asset", and collectively "Assets"), free and clear of all
obligations, security interests, claims, liens and encumbrances, except as
specifically assumed, or taken subject to, by Pentegra pursuant to SECTION
1.3(b) hereof.
<PAGE>
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and contributed hereunder, and Contributor shall retain all of
its right, title and interest in and to, the assets not specifically
transferred hereunder, including without limitation, the assets described on
EXHIBIT 1.2 (the "Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Contributor
contained herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Contributor the consideration
specified in ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Contributor listed on EXHIBIT
1.3(b) attached hereto to the extent that such obligations, commitments,
liabilities and indebtedness are current and not otherwise in default. (the
"Assumed Liabilities"). Notwithstanding any contrary provision contained
herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra
assume: (i) any liability, commitment or obligation or trade payable or
indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability
set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of
or default under such contracts, leases, commitments or obligations which
occurred on or before the Closing Date; (iii) any liability for any employee
benefits payable to employees of Contributor, including, but not limited to,
liabilities arising under any Contributor Plan (as defined in SECTION 2.21
hereof); (iv) any liability based upon or arising out of a violation of any
antitrust or similar restraint-of-trade laws by Contributor or any Partner,
including, without limiting the generality of the foregoing, any such
antitrust liability which may arise in connection with agreements, contracts,
commitments or orders for the sale of goods or provision of services by
Contributor reflected on the books of Contributor at or prior to the Closing
Date; (v) any liability based upon or arising out of any tortious or wrongful
actions of Contributor, any licensed professional employee or independent
contractor of Contributor or any Partner, (vi) any liability for the payment
of any taxes of Contributor or any Partner, including without limitation,
sales, use and other transfer taxes and income taxes arising from or by
reason of the transactions contemplated by this Agreement; (vii) any
indebtedness secured by deeds of trust or mortgages on real property; nor
(viii) any liability incurred or to be incurred pursuant to any malpractice
or other suits or actions pending against Contributor or any Partner.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement,
Contributor and Partners shall execute and deliver all such deeds, bills of
sale, assignments and assurances and take and do all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under the Assets in Pentegra or
otherwise to carry out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND PARTNERS.
Contributor and Partners, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 EXISTENCE; GOOD STANDING. Contributor is a partnership duly
organized, validly existing and in good standing under the laws of the State
of Texas. Contributor has all necessary partnership power to own
<PAGE>
all of its assets and to carry on its business as such business is now being
conducted. Contributor does not own stock in or control, directly or
indirectly, any other corporation, association or business organization, nor
is Contributor a party to any joint venture or partnership. The Partners are
the sole partners of Contributor and own all outstanding partnership
interests free of all security interests, claims, encumbrances and liens in
the amounts set forth on EXHIBIT 2.1. Each partnreship interest of
Contributor has been legally and validly issued and fully paid and
nonassessable. There are no outstanding (a) bonds, debentures, notes or
other obligations the holders of which have the right to vote with the
partners of Contributor on any matter, (b) securities of Contributor
convertible into equity interests in Contributor, or (c) commitments,
options, rights or warrants to issue any such equity interests in
Contributor, to issue securities of Contributor convertible into such equity
interests, or to redeem any securities of Contributor. No partnership
interests of Contributor have been issued or disposed of in violation of the
preemptive rights, rights of first refusal or similar rights of any of
Contributor's partners. Contributor is not required to qualify to do
business as a foreign corporation in any other state or jurisdiction by
reason of its business, properties or activities in or relating to such other
state or jurisdiction. Contributor does not have any assets, employees or
offices in any state other than the state set forth in the first sentence of
this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the
partnership power to execute, deliver and perform this Agreement and all
agreements and other documents executed and delivered by it pursuant to this
Agreement or to be executed and delivered on the Closing Date, and has taken
all action required by law, its Partnership Agreement or otherwise, to
authorize the execution, delivery and performance of this Agreement and such
related documents. Each Partner has the legal capacity to enter into and
perform this Agreement and the other agreements to be executed and delivered
in connection herewith. Contributor has obtained the approval of its partners
necessary to the consummation of the transactions contemplated herein. This
Agreement and all agreements and documents executed and delivered in
connection herewith have been, or will be as of the Closing Date, duly
executed and delivered by Contributor and Partners, as appropriate, and
constitute or will constitute the legal, valid and binding obligations of
Contributor and Partners, enforceable against Contributor and Partners in
accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and
delivery of this Agreement, and the agreements executed and delivered
pursuant to this Agreement or to be executed and delivered on the Closing
Date, do not, and, subject to the receipt of consents described on EXHIBIT
2.4, the consummation of the actions contemplated hereby will not, violate
any provision of the Partnership Agreement of Contributor or any provisions
of, or result in the acceleration of, any obligation under any mortgage,
lien, lease, agreement, rent, instrument, order, arbitration award, judgment
or decree to which Contributor or any Partner is a party or by which
Contributor or any Partner is bound, or violate any material restrictions of
any kind to which Contributor is subject, or result in any lien or
encumbrance on any of Contributor's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to
the knowledge of Contributor and Partners, threatened, which may result in
the revocation, cancellation or suspension, or any adverse modification, of
any such licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Contributor or Partners.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been declared or paid by Contributor on any of its
partnership interests since the Balance Sheet Date. No
<PAGE>
repurchase of any of Contributor's partnership interests has been approved,
effected or is pending, or is contemplated by Contributor.
2.6 CORPORATE RECORDS. True and correct copies of the Partnership
Agreement and minutes of Contributor and all amendments thereto have been
delivered to Pentegra. The books of account of Contributor have been kept
accurately in the ordinary course of business and the revenues, expenses,
assets and liabilities of Contributor have been properly recorded in such
books.
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore
furnished Pentegra with copies of its unaudited balance sheet and related
unaudited statements of income, retained earnings and cash flows for its
prior two full fiscal years, as well as copies of its unaudited balance sheet
as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet"
and the latest date thereof shall be referred to as the "Balance Sheet Date")
and any related unaudited statements of income, retained earnings, schedule
of accounts receivable, accounts payable and accrued liabilities, and cash
flows for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Contributor as
of the dates and for the periods indicated and reflect all fixed and
contingent liabilities of Contributor.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Contributor or any Partner leases, as lessor or lessee,
real or personal property used in operating the Business, related to the
Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and
enforceable in accordance with their respective terms, and there is not under
any such lease any existing default by Contributor, as lessor or lessee, or
any condition or event of which any Partner or Contributor has knowledge
which with notice or lapse of time, or both, would constitute a default, in
respect of which Contributor or Partners have not taken adequate steps to
cure such default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Contributor and Partners have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good, valid
and marketable title to all of the Assets, free and clear of any liens,
claims, charges, exceptions or encumbrances, except for those, if any, which
are set forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all
encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances
indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the
Closing Date and evidence of such releases of liens and claims shall be
provided to Pentegra on the Closing Date and the Assets shall not be used to
satisfy such liens, claims or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Contributor, are in good, current, standard and merchantable
condition and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Contributor has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Contributor, including the names of any entities from whom Contributor
previously acquired significant assets. Except for off-the-shelf software
licenses and except as set forth on EXHIBIT 2.12, Contributor is not a
licensee in respect of any patents, trademarks, service marks, trade names,
copyrights or applications therefor, or manufacturing processes, formulas or
trade secrets or similar items and no such licenses are necessary for the
conduct of the Business or the use of the Assets. No claim is pending or has
been made to the effect that the Assets or the present or past operations of
Contributor in connection with the Assets or Business infringe upon or
conflict with the asserted rights of others to any patents, patent rights,
<PAGE>
manufacturing processes, trade names, trademarks, service marks, inventions,
licenses, specialized treatment protocols, copyrights, formulas, know-how and
trade secrets. Contributor has the sole and exclusive right to use all
Assets constituting proprietary rights without infringing or violating the
rights of any third parties and no consents of any third parties are required
for the use thereof by Pentegra.
2.13 PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached
hereto is a true and complete list, as of the date of this Agreement of: (a)
the most recent payroll report of Contributor, showing all current employees
of Contributor and their current levels of compensation, (b) promised
increases in compensation of employees of Contributor that have not yet been
effected, (c) oral or written employment agreements, consulting agreements or
independent contractor agreements (and all amendments thereto) to which
Contributor is a party, copies of which have been delivered to Pentegra, and
(d) all employee manuals, materials, policies, procedures and work-related
rules, copies of which have been delivered to Pentegra. Contributor is in
compliance with all applicable laws, rules, regulations and ordinances
respecting employment and employment practices. Contributor has not engaged
in any unfair labor practice. There are no unfair labor practices charges or
complaints pending or threatened against Contributor, and Contributor has
never been a party to any agreement with any union, labor organization or
collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither any Partner, Contributor nor the
Business nor any of the Assets is subject to any pending, nor does
Contributor or any Partner have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Contributor, any Partner, the Business, the Assets
or the transactions contemplated by this Agreement, and, to the knowledge of
Contributor and Partners, no basis for any such action exists, nor is there
any legal impediment of which Contributor or any Partner has knowledge to the
continued operation of its business or the use of the Assets in the ordinary
course, subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Contributor ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted or may be made
by any party thereto. Except as indicated on such Exhibits, there is not
under any such Contract any existing default by Contributor or any Partner,
or any condition or event of which Contributor or any Partner has knowledge
which with notice or lapse of time, or both, would constitute a default.
Contributor and Partners have no knowledge of any default by any other party
to such Contracts. Contributor and Partners have not received notice of the
intention of any party to any Contract to cancel or terminate any Contract
and have no reason to believe that any amendment or change to any Contract is
contemplated by any party thereto. Other than those contracts, obligations
and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15,
Contributor are not a party to any material written or oral agreement
contract, lease or arrangement, including without limitation, any is:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or
<PAGE>
sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
Contributor or Partners, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Contributor on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16,
Contributor has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(d) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Contributor since the Balance
Sheet Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
<PAGE>
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(j) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties,
assets or business or the Business or the Assets, or experienced any other
material adverse change in its financial condition, assets, prospects,
liabilities or business;
(n) Declared or paid a distribution, payment or dividend of any
kind on the equity interests of Contributor;
(o) Repurchased, approved any repurchase or agreed to repurchase
any of Contributor's partnership interests; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Contributor has filed all tax returns (including tax
reports and other statements) required to have been filed by it, and has paid
all taxes (including any interest, penalty or additions thereto) required to
have been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Contributor has not received any notice that any tax deficiency
or delinquency has been or may be asserted against Contributor. There are
no audits relating to taxes of Contributor pending or in process or, to the
knowledge of Contributor, threatened. Contributor is not currently the
beneficiary of any waiver of any statute of limitations in respect of taxes
nor of any extension of time within which to file any tax return or to pay
any tax assessment or deficiency. There are no liens or encumbrances
relating to taxes on or threatened against any of the assets of Contributor.
Contributor has withheld and paid all taxes required by law to have been
withheld and paid by it. Neither Contributor nor any predecessor of
Contributor is or has been a party to any tax allocation or sharing agreement
or a member of an affiliated group of corporations filing a consolidated
Federal income tax return. Contributor has delivered to Pentegra correct and
complete copies of Contributor's three most recently filed annual state,
local and Federal income tax returns, together with all examination reports
and statements of deficiencies assessed against or agreed to by Contributor
during the three calendar year period preceding the date of this Agreement.
Contributor has neither made any payments, is obligated to make any payments,
or is a party to any agreement that under any circumstance could obligate it
to make any payments that will not be deductible under Code section 280G.
(b) Contributor does not intend to dispose of any of the shares of
Pentegra Common Stock to be received hereunder and is not a party to any
plan, arrangement or agreement for the disposition of such shares.
Contributor and Partners have no knowledge, after due inquiry, of any such
intent, plan, arrangement or agreement by any Partner. Nothing contained
herein shall prohibit Contributor from selling such shares of Pentegra Common
Stock after the designated holding period and in accordance with SECTION 12.1
hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or
<PAGE>
similar fees in connection with the transactions contemplated by this
Agreement which may be now or hereafter asserted against Pentegra,
Contributor or Contributor's Partners resulting from any action taken by
Contributor or any Partner or their respective agents or employees, or any of
them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Contributor did not have, as of the Balance
Sheet Date, and has not incurred since that date and will not have incurred
as of the Closing Date, any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
other than those incurred in the ordinary course of business or as set forth
on EXHIBIT 2.16. Contributor and Partners do not know, or have reasonable
grounds to know, of any basis for the assertion against Contributor or any
Partner as of the Balance Sheet Date, of any claim or liability of any nature
in any amount not fully reflected or reserved against on the Balance Sheet,
or of any claim or liability of any nature arising since that date other than
those incurred in the ordinary course of business or contemplated by this
Agreement. All indebtedness of Contributor (including without limitation,
indebtedness for borrowed money, guaranties and capital lease obligations) is
described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Contributor, each Partner and each licensed
professional of Contributor carries property, liability, malpractice,
workers' compensation and such other types of insurance as is customary in
the industry. Valid and enforceable policies in such amounts are outstanding
and duly in force and will remain duly in force through the Closing Date.
All such policies are described in EXHIBIT 2.20 attached hereto and true and
correct copies have been delivered to Pentegra. Neither Partners nor
Contributor have not received notice or other communication from the issuer
of any such insurance policy cancelling or amending such policy or
threatening to do so. Neither Contributor, nor any Partner nor any licensed
professional employee of Contributor has any outstanding claims, settlements
or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Contributor has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Contributor
Plan," and collectively "Contributor Plans") have been operated and
administered in all material respects in accordance with all applicable laws,
rules and regulations, including without limitation, ERISA, the Internal
Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964,
as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in
Employment Act of 1967, as amended, and the related rules and regulations
adopted by those Federal agencies responsible for the administration of such
laws. No act or failure to act by Contributor has resulted in a "prohibited
transaction" (as defined in ERISA) with respect to the Contributor Plans. No
"reportable event" (as defined in ERISA) has occurred with respect to any of
the Contributor Plans. Contributor has not previously made, is not currently
making, and is not obligated in any way to make, any contributions to any
multiemployer plan within the meaning of the Multi-Employer Pension Plan
Amendments Act of 1980. With respect to each Contributor Plan, either (i)
the value of plan assets (including commitments under insurance contracts) is
at least equal to the value of plan liabilities or (ii) the value of plan
liabilities in excess of plan assets is disclosed on the Balance Sheet, all
as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Contributor, the Business or the Assets.
<PAGE>
2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Partners and
Contributor's licensed professional employees, and the conduct of the
Business and use of the Assets, have complied with all applicable laws,
rules, regulations and licensing requirements, including, without limitation,
the Federal Environmental Protection Act, the Occupational Safety and Health
Act, the Americans with Disabilities Act and any environmental laws and
medical waste laws, and there exist no violations by Contributor, any Partner
or any licensed professional employee of Contributor of any Federal, state or
local law or regulation. Contributor and Partners have not received any
notice of a violation of any Federal, state and local laws, regulations and
ordinances relating to the operations of the Business and Assets and no
notice of any pending inspection or violation of any such law, regulation or
ordinance has been received by Contributor.
2.24 THIRD PARTY PAYORS. Contributor, Partners and each licensed
professional employee or independent contractor of Contributor has timely
filed all claims or other reports required to be filed with respect to the
purchase of services by third-party payors, and all such claims or reports
are complete and accurate, and has no liability to any payor with respect
thereto. There are no pending appeals, overpayment determinations,
adjustments, challenges, audit, litigation or notices of intent to open
Medicare or Medicaid claim determinations or other reports required to be
filed by Contributor, any Partner and each licensed professional employee of
Contributor. Neither Contributor, nor any Partner, nor any licensed
professional employee of Contributor has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Contributor, Partners and Contributor's licensed professional employees has
not (a) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made
any false statement or representation of a material fact for use in
determining rights to any benefit or payment; (c) failed to disclose
knowledge of the occurrence of any event affecting the initial or continued
right to any benefit or payment on its own behalf or on behalf of another,
with the intent to fraudulently secure such benefit or payment; and (d)
violated any applicable state anti-remuneration or self-referral statutes,
rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Contributor or Partners in this Agreement, and no Exhibit or certificate
issued or executed by, or information furnished by, officers or directors of
Contributor or any Partner and furnished or to be furnished to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Contributor has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Contributor, or their respective
spouses, children or affiliates, owns directly or indirectly, on an
individual or joint basis, any interest in, has a compensation or other
financial arrangement with, or serves as an officer or director of, any
customer or supplier or competitor of Contributor or any organization that
has a material contract or arrangement with Contributor.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Contributor's services which
accounted for more than 10% of revenues of Contributor in the preceding
fiscal year. Contributor has good relations with all such payors and other
material payors of Contributor and none of such payors has notified
Contributor that it intends to discontinue its relationship with
<PAGE>
Contributor or to deny any claims submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Contributor and Partners as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would
not have a material adverse effect, there are no proceedings pending or, to
the knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has knowledge to the continued operation of its business or the use
of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
<PAGE>
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Contributor or
any Partner pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
SECTION 4. COVENANTS OF CONTRIBUTOR AND PARTNERS.
Contributor and Partners, jointly and severally, agree that between the
date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Partners shall
use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions.
Contributor and Partners agree to complete the Exhibits hereto to be provided
by them in form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Contributor and Partners shall operate the
Business and use the Assets in the ordinary course. Contributor and Partners
shall not enter into any lease, contract, indebtedness, commitment, purchase
or sale or acquire or dispose of any capital asset relating to the Business
or the Assets except in the ordinary course of business. Contributor and
Partners shall use their best efforts to preserve the Business and Assets
intact and shall not take any action that would have an adverse effect on the
Business or Assets. Contributor and Partners shall use their best efforts to
preserve intact the relationships with payors, customers, suppliers, patients
and others having significant business relations with Contributor.
Contributor and Partners shall collect its receivables and pay its trade
payables in the ordinary course of business. Contributor and Partners shall
not introduce any new method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Contributor and Partners shall permit Pentegra
and its authorized representatives access to, and make available for
inspection, all of the assets and business of Contributor, the Business and
the Assets, including employees, customers and suppliers and permit Pentegra
and its authorized representatives to inspect and make copies of all
documents, records and information with respect to the business or assets of
Contributor, the Business or the Assets as Pentegra or its representatives
may request. Contributor and Partners shall promptly notify Pentegra in
writing of (a) any notice or communication relating to a default or event
that, with notice or lapse of time or both, could become a default, under any
contract, commitment or obligation to which Contributor is a party or
relating to the Business or the Assets, and (b) any adverse change in
Contributor's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor
and Partners shall use their best efforts to secure all necessary approvals
and consents of third parties to the consummation of the transactions
contemplated hereby, including consents described on EXHIBIT 2.4.
Contributor and Partners shall use their best efforts to obtain all licenses,
permits, approvals or other authorizations required under any law, rule,
regulation, or otherwise to provide the services of Contributor contemplated
by the Service Agreement and to conduct the intended business of Contributor
and operate the Business and use the Assets.
<PAGE>
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of the Closing or the termination of this Agreement in accordance with
the provisions hereof, Contributor and Partners shall not, and shall use its
best efforts to cause Contributor's employees, agents and representatives not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer, including without limitation,
any proposal or offer to any Partner, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of Contributor or
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to such proposal
or offer, and Contributor and Partners will immediately cease any such
activities, discussions or negotiations heretofore conducted with respect to any
of the foregoing. Contributor and Partners shall immediately notify Pentegra if
any such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby covenants
and agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Contributor or any entity might have any liability whatsoever
arising from any insurance, pension plan, employment tax or similar liability
of Contributor to any employee or other person or entity (including, without
limitation, any Contributor Plan and any liability under employment contracts
with Contributor) allocable to services performed prior to the Closing Date.
Contributor and Partners acknowledge that the purpose and intent of this
covenant is to assure that Pentegra shall have no unfunded liability whatsoever
at any time after the Closing Date with respect to any of Contributor's
employees or similar persons or entities, including, without limitation, any
Contributor Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of any Partner (other than in the ordinary course of business) or other employee
or an independent contractor of Contributor, adopt, amend or terminate any
compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect upon Contributor, its business, assets or
prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Contributor, nor will any repurchase of
any of Contributor's partnership interests be approved or effected.
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Partners shall
use their best efforts to take, or cause to be taken, all actions necessary to
effect the acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Contributor and Partners will not change
in any material respect the tax or financial accounting methods or practices
followed by Contributor (including any material change in any assumption
underlying, or any method of calculating, any bad debt, contingency or other
reserve), except as may be required by law or generally accepted accounting
principles. Contributor and Partners will duly, accurately and timely (without
regard to any extensions of time) file all returns, information statements and
other documents relating to taxes of Contributor required to be filed by it, and
pay all taxes required to be paid by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Partners and
Contributor hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Contributor and Partners covenant and
<PAGE>
agree that all of the creditors with respect to the Business and the Assets
will be paid in full by Contributor prior to the Closing Date, except to
extent that any liability to such creditors is assumed by Pentegra pursuant
to this Agreement. If required by Pentegra, Contributor and Partners shall
furnish Pentegra with proof of payment of all creditors with respect to the
Business and the Assets. Notwithstanding the foregoing, Contributor and
Partners may dispute the validity or amount of any such creditor's claim
without being deemed to be in violation of this SECTION 4.11, provided that
such dispute is in good faith and does not unreasonably delay the resolution
of the claim and provided, further that Contributor and Partners agree to
indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Contributor leases any of its premises from any Partner or
other affiliate of Contributor or any Partner of Contributor, Pentegra shall
have entered into a building lease (the "Building Lease") with the owner of such
premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, (i) a five year initial
term plus three five-year renewal options, (ii) a lease rate equal to the fair
market value lease rate, as agreed to by Pentegra, and (iii) such other
provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Contributor and Partners shall cooperate with
all requests made by Pentegra for the purpose of allowing Pentegra to hire those
non-dentist employees of Contributor designated by Pentegra, such employment to
be effective as of the Closing Date. Notwithstanding the above, Contributor and
Partners shall remain liable under any Contributor Plans for any claims incurred
by any employees or their spouses or dependents, and for all compensation,
bonuses, benefits and other such items and other liabilities related to
Contributor's employees incurred by Contributor prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges that all
employees of Contributor hired by Pentegra pursuant to SECTION 4.13 above,
shall be treated as "leased employees" (as defined in Code Section 414(n)) of
Contributor and shall be treated as Clinic employees for purposes of eligibility
and participation in Contributor Plans.
4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective as
of the Closing Date.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND PARTNERS.
Pentegra, Partners and Contributor agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Contributor and Partners shall
cooperate to promptly prepare and file with the Securities Exchange Commission
("SEC") the Registration Statement on Form S-1
<PAGE>
(or other appropriate Form) to be filed by Pentegra in connection with its
Initial Public Offering (including the prospectus constituting a part
thereof, the "Registration Statement"). Pentegra shall obtain all necessary
state securities laws or "Blue Sky" permits and approvals required to carry
out the transactions contemplated by this Agreement and the Contributor and
Partners shall furnish all information concerning Contributor and Partners as
may be reasonable requested in connection with any such action.
Contributor and Partner represent and warrant that none of the information
or documents supplied or to be supplied by it specifically for inclusion in the
Registration Statement, by exhibit or otherwise, will, at the time the
Registration Statement and each amendment or supplement thereto, if any, becomes
effective under the Securities Act of 1933, 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, in light of the circumstances under
which they were made, not misleading. Contributor and Partners shall be
entitled to review the Registration Statement and each amendment thereto, if
any, prior to the time each becomes effective under the Securities Act of 1933.
Contributor and Partners shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by Pentegra
in connection with the preparation of the Registration Statement and each
amendment or supplement thereto, or any other statement, filing, notice or
application made by or on behalf of each such party or any of its subsidiaries
to any governmental entity in connection with the transactions contemplated by
the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at or
prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Contributor and Partners contained herein shall have been true and correct in
all respects when initially made and shall be true and correct in all respects
as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Contributor and Partners shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Contributor and Partners prior to
the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Contributor shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Contributor, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and Pentegra shall
have executed
<PAGE>
and delivered a Service Agreement (the "Service Agreement"), in substantially
the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will
provide management services to the Contributor. Each Partner shall have
executed and delivered a Guaranty Agreement in substantially the form
attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Partner
shall, among other things, guaranty the obligations of Contributor under the
Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated, and
caused each Partner of Contributor that has an existing employment agreement
with Contributor to have terminated his or her employment agreement with
Contributor and shall have executed an employment agreement ("Employment
Agreement") with Contributor in form and substance attached hereto as EXHIBIT
7.8 and otherwise satisfactory to Contributor and Pentegra.
7.9 CONSENTS AND APPROVALS. Contributor and Partners shall have obtained
all necessary government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly
executed in form satisfactory to Pentegra and its counsel, referred to in
SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or
payables between Contributor and its Partners or affiliates and Contributor
shall not have any liabilities, including indebtedness, guaranties and capital
leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Contributor and Partners shall have named Pentegra as an
additional insured on their liability insurance program in accordance with
SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Contributor since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. CONTRIBUTOR'S AND PARTNERS' CONDITIONS PRECEDENT.
The obligations of Contributor and Partners hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Pentegra contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall
<PAGE>
have been threatened orally or in writing, asserted, instituted or entered to
restrain or prohibit the carrying out of the transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Contributor shall have received all documents,
duly executed in form satisfactory to Contributor and its counsel, referred to
in SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF CONTRIBUTOR AND PARTNERS. Within five business days
after requested by Pentegra, Contributor and Partners shall deliver to Pentegra
the following, all of which shall be in a form satisfactory to counsel to
Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in
escrow pending Closing, pursuant to an escrow agreement or letter agreement in
form and substance mutually acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals of
all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Partners authorizing the
execution, delivery and performance of this Agreement, the Service Agreement,
the Employment Agreements and all related documents and agreements each
certified by the Secretary as being true and correct copies of the original
thereof;
(d) a bill of sale conveying the Assets to Pentegra;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(f) certificates of the Partners and a duly authorized officer of
Contributor dated as of the Closing Date, (i) as to the truth and correctness of
the representations and warranties of Contributor and Partners contained herein;
(ii) as to the performance of and compliance by Contributor and Partner with all
covenants contained herein; and (iii) certifying that all conditions precedent
of Contributor and Partners to the Closing have been satisfied;
(g) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Contributor and any state of required
foreign qualification of Contributor establishing that Contributor is in
existence and is in good standing to transact business in its state of
incorporation;
(h) an opinion of counsel to Contributor and Partner opining as to
the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Contributor, the enforceability of this Agreement and the other agreements and
documents to
<PAGE>
be executed in connection herewith, and other matters reasonably
requested by Pentegra;
(i) non-foreign affidavits executed by Contributor;
(j) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(k) an executed Registration Rights Agreement between Pentegra and
Contributor, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(l) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall
deliver to Contributor and Partner, the following, all of which shall be in a
form satisfactory to counsel to Contributor and Partners and shall be held by
Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing,
pursuant to an escrow agreement or letter agreement in form and substance
mutually acceptable to the parties hereto:
(a) the Acquisition Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance of
this Agreement and all related documents and agreements each certified by the
Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii) certifying
that all conditions precedent of Pentegra to the Closing have been satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and the
State of incorporation of Contributor;
(h) an opinion of counsel to Pentegra opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Pentegra, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Contributor;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Contributor to carry out and effect the purpose and intent of this Agreement.
<PAGE>
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit attached hereto, any agreement executed pursuant hereto, and
any certificate executed and delivered by any party pursuant to the terms of
this Agreement, shall constitute representations and warranties of
Contributor and Partners, jointly and severally, or of Pentegra, as the case
may be. All such representations and warranties, and all representations and
warranties expressly labeled as such in this Agreement shall survive the date
of this Agreement and the Closing Date for a period of five (5) years
following the Closing Date, except that (i) the representations and
warranties with respect to environmental and medical waste laws and health
care laws and matters shall survive for a period of fifteen (15) years and
tax representations shall survive until one year after the expiration of the
applicable statute of limitations. Each party covenants with the other
parties not to make any claim with respect to such representations and
warranties, against any party after the date on which such survival period
shall terminate. No party shall be entitled to claim indemnity from any
other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has
timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the
case may be. Each party hereby releases, acquits and discharges the other
party from any and all claims and demands, actions and causes of action,
damages, costs, expenses and rights of setoff with respect to which the
notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely
provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD CONTRIBUTOR AND ITS PartnerS, AGENTS AND EMPLOYEES (EACH
OF THE FOREGOING, INCLUDING CONTRIBUTOR AND PartnerS, FOR PURPOSES OF THIS
SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED
PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES,
ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED
TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM
OR BY REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY
PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF,
OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
<PAGE>
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY CONTRIBUTOR AND PARTNERS. CONTRIBUTOR AND PARTNERS
(FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4,
"INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS
AFFILIATES, OFFICERS, DIRECTORS, PARTNERS, AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE
EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND
AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS,
DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS WHETHER ON OR
AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY CONTRIBUTOR OR ITS PARTNERS OR THEIR CONSULTANTS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL
LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION
ARISING OUT OF OR RESULTING FROM ACTIONS OF THE CONTRIBUTOR OR PARTNERS
RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER
THE CLOSING DATE,
(E) TAXES OF CONTRIBUTOR OR ANY PARTNER OR ANY OTHER PERSON OR ENTITY
RELATED TO OR AFFILIATED WITH THE CONTRIBUTOR OR ANY PARTNER ARISING FROM OR AS
A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF CONTRIBUTOR OR THE PARTNERS FOR COSTS AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE
NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW
<PAGE>
OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED
UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS PARTNERS
AND PROVIDED TO PENTEGRA, OR ITS COUNSEL BY THE CONTRIBUTOR OR ITS PARTNERS
SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION
STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF
OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED
OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS
PARTNERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the defense
of such action or proceeding, such Indemnified Person shall notify Indemnitor
thereof. If any such action or other proceeding shall be brought against any
Indemnified Person, Indemnitor shall, upon written notice given within a
reasonable time following receipt by Indemnitor of such notice from Indemnified
Person, be entitled to assume the defense of such action or proceeding with
counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person;
provided, however, that any Indemnified Person may at its own expense retain
separate counsel to participate in such defense. Notwithstanding the foregoing,
Indemnified Person shall have the right to employ separate counsel at
Indemnitor's expense and to control its own defense of such action or proceeding
if, in the reasonable opinion of counsel to such Indemnified Person, (a) there
are or may be legal defenses available to such Indemnified Person or to other
Indemnified Persons that are different from or additional to those available to
Indemnitor and which could not be adequately advanced by counsel chosen by
Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor
and such Indemnified Person that would make such separate representation
advisable; provided, however, that in no event shall Indemnitor be required to
pay fees and expenses hereunder for more than one firm of attorneys of
Indemnified Person in any jurisdiction in any one action or proceeding or group
of related actions or proceedings. Indemnitor shall not, without the prior
written consent of any Indemnified Person, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding to which such Indemnified Person is a party unless such settlement,
compromise or consent includes an unconditional release of such Indemnified
Person from all liability arising or potentially arising from or by reason of
such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Contributor or any Partner giving
rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra
shall be entitled to offset the amount of damages incurred by it as a result
of such breach of warranty, representation, covenant or agreement against any
amounts payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of
Contributor or any Partner contained in
<PAGE>
this Agreement or in any certificate or other document executed and delivered
by Contributor or any Partner pursuant to this Agreement is or becomes untrue
or breached in any material respect or if Contributor or any Partner fails to
comply in any material respect with any covenant or agreement contained
herein, and any such misrepresentation, noncompliance or breach is not cured,
waived or eliminated within twenty (20) days after receipt of written notice
thereof;
(c) at any time by Contributor or any Partner if any representation or
warranty of Pentegra contained in this Agreement or in any certificate or other
document executed and delivered by Pentegra pursuant to this Agreement is or
becomes untrue or breached in any material respect or if Pentegra fails to
comply in any material respect with any covenant or agreement contained herein
and such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra, Partners or Contributor if the transaction contemplated
hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Contributor, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date,
Contributor shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of
Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer shall
be treated as effective for any purpose or (b) engage in any transaction,
whether or not with respect to any shares of Pentegra Common Stock or any
interest therein, the intent or effect of which is to reduce the risk of owning
shares of Pentegra Common Stock. The certificates evidencing the Pentegra
Common Stock delivered to Contributor pursuant to the terms hereof will bear a
legend substantially in the form set forth below and containing such other
information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Partners
acknowledge that the shares of Pentegra Common Stock to be delivered to
Contributor pursuant to this Agreement have not been and will not be registered
under the Securities Act of 1933 and may not be resold without compliance with
the Securities Act of 1933. The Pentegra Common Stock to be acquired by
Contributor pursuant to this Agreement is being acquired solely for its own
account, for investment purposes only and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution. Contributor covenants, warrants and represents that none of the
shares of Pentegra Common Stock issued to it will be offered, sold, assigned,
pledged, hypothecated, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the Securities Act, as
amended, and the rules and regulations of the Securities Exchange Commission and
applicable state securities laws and regulations. All certificates evidencing
shares of Pentegra Common Stock shall bear the following legend in addition to
the
<PAGE>
legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Contributor resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Partners are able to
bear the economic risk of an investment in Pentegra Common Stock acquired
pursuant to this Agreement and can afford to sustain a total loss of such
investment and have such knowledge and experience in financial and business
matters that they are capable of evaluating the merits and risks of the proposed
investment and therefore have the capacity to protect their own interests in
connection with the acquisition of the Pentegra Common Stock. Contributor,
Partners and their representatives have had an adequate opportunity to ask
questions and receive answers from the officers of Pentegra concerning any and
all matters relating to the background and experience of the officers and
directors of Pentegra, the plans for the operations of the business of Pentegra,
and any plans for additional acquisitions and the like. Contributor, Partners
and their representatives have asked any and all questions in the nature
described in the preceding sentence and all questions have been answered to
their satisfaction. Contractor and Partners are "accredited investors" as
defined in Regulation D of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and
Partners recognize and acknowledge that they had in the past, currently have,
and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Contributor and Partners agree that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally
through no fault of Contributor or Partners, (ii) disclosure is required by
law or the order of any governmental authority under color of law, provided,
that prior to disclosing any information pursuant to this clause (ii),
Contributor and Partners shall, if possible, give prior written notice
thereof to the other parties hereto, and provide such other parties hereto
with the opportunity to contest such disclosure, (iii) Contributor and
Partners reasonably believe that such disclosure is required in connection
with the defense of a lawsuit against the disclosing party, or (iv)
Contributor and Partners are the sole and exclusive owner of such
confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Contributor or Partners of the provisions of this SECTION 13, Pentegra shall
be entitled to an injunction restraining Contributor and Partners from
disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Pentegra from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. The obligations of the parties under this SECTION 13 shall
survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement, together with the transactions contemplated by the Other
Agreement and the Initial Public Offering, will qualify as an exchange meeting
the requirements of Section 351 of the Code. The tax returns (and schedules
thereto) of Partners, Contributor and Pentegra shall be filed in a manner
consistent with such intention and Contributor and Pentegra shall each provide
the other with such tax information, reports, returns or schedules as may be
reasonably required to assist the other in so reporting the transactions
contemplated hereby.
<PAGE>
14.2 NOTICES. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery, or by
facsimile AND overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Contributor or Partners:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this Agreement,
whether or not such transactions are consummated. Without limiting the
generality of the foregoing and whether or not such liabilities may be deemed to
have been incurred in the ordinary course of business, Pentegra shall not be
liable to or required to pay, either directly or indirectly, any fees and
expenses of legal counsel, accountants, auditors or other persons or entities
retained by Contributor or any Partner for services rendered in connection with
negotiating and closing the transactions contemplated by this Agreement or the
documents to be executed in connection herewith, whether or not such costs or
expenses are incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure, either
written or oral, regarding the transactions contemplated by this Agreement
without the prior written consent of the other party, provided that the
foregoing shall not prohibit any disclosure (a) by press release, filing or
otherwise that Pentegra has determined in good faith
<PAGE>
judgment to be required by Federal securities laws or the rules of the
National Association of Securities Dealers, (b) to attorneys, accountants,
investment bankers or other agents of the parties assisting the parties in
connection with the transactions contemplated by this Agreement, and (c) by
Pentegra in connection with the conduct of its Initial Public Offering and
conducting an examination of the operations and assets of Contributor.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF
CONTRIBUTOR AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS
PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS
ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY
AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR
ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one and the same
instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any entity
that, through one or more intermediaries is, controlled, controlled by or under
common control with, Pentegra. Upon any such assignment prior to the Closing,
all references herein to Pentegra (including those to Pentegra Common Stock)
shall be deemed to include references to the assignee and the assignee's common
stock. Notwithstanding any such assignment, Pentegra shall not, absent a
written release from Contributor, be relieved from its obligations to
Contributor under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Contributor, on the other hand, file suit in any court against any
other party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at Closing
a pro rata portion of all
<PAGE>
taxes levied upon the Assets for the calendar year in which the Closing
occurs. Such taxes shall be estimated, apportioned and pro-rated among
Contributor and Pentegra as of the Closing Date, and the prorated amount due
Pentegra shall be credited to the cash portion of the Purchase Consideration.
Upon payment by Pentegra of such taxes actually assessed and paid on the
Assets, Pentegra shall calculate the apportionment of such taxes and shall
pay Contributor or may demand from Contributor, and Contributor agrees to
pay, the amount necessary to correct the estimate and proration made at
Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing, and
signed by the parties hereto. The waiver of any of the terms and conditions of
this Agreement shall not be construed as a waiver of any other terms and
conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Contributors or Partners (hereinafter referred to as a "Party"), whether made
before or after the institution of any legal proceeding, any dispute among the
parties hereto in any way arising out of, related to, or in connection with
this Agreement (hereinafter a "Dispute"), shall be resolved by binding
arbitration in accordance with the terms of this Section (hereinafter the
"Arbitration Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in accordance
with the terms of this Arbitration Program, the Commercial Arbitration Rules of
the AAA. In the event of any inconsistency between this Arbitration Program and
those rules or statutes, then the terms of this Arbitration Program shall
control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been completed
and the arbitrators have determined each party's post-arbitration obligations
and responsibilities as it relates to such warranties and covenants. No
provision of, nor the exercise of any rights under, this Arbitration Program
shall limit the right of any Party at any time to seek or use ancillary or
preliminary judicial or non-judicial self help remedies for the purposes of
obtaining, perfecting, preserving, or foreclosing upon any personal property in
which there has been granted a security interest or lien by a Party in the
Documents. In Disputes involving indebtedness or other monetary obligations,
each Party agrees that the other Party may proceed against all liable persons,
jointly and severally against one or more of them, without impairing rights
against other liable persons. Nor shall a Party be required to join the
principal obligor or any other liable persons (e.g., sureties or guarantors) in
any proceeding against a particular person. A Party may release or settle with
one or more liable persons as the Party deems fit without releasing or impairing
rights to proceed against any persons not so released. All statutes of
limitation that would otherwise be applicable shall apply to any arbitration
proceeding.
The party seeking arbitration shall notify the other Party, in writing, of
that Party's desire to arbitrate a dispute; and each Party shall, within twenty
(20) days from the date such notification is received, select an arbitrator, and
those two arbitrators shall select a third arbitrator within ten (10) days
thereafter. The issues or claims in dispute shall be committed to writing,
separately stated and numbered, and each party's proposed answers or contentions
shall be signed below the questions. Failure by a party to select an arbitrator
within the prescribed time period shall serve as that Party's acquiescence and
acceptance of the other party's selection of arbitrator. The arbitrators shall
resolve all Disputes in accordance with the applicable substantive law. Any
Dispute shall be decided by a majority vote of three arbitrators, unless the
claim or amount in controversy does not exceed $100,000.00, in which case a
single arbitrator (who shall have authority to render a maximum award of
$100,000.00, including all damages of any kind, costs and fees) may decide the
Dispute. The arbitrators may grant any remedy or relief that the arbitrators
deem just and equitable and within the scope of this Arbitration Program. The
arbitrators may also grant such ancillary relief as is necessary to make
effective the award. In all arbitration proceedings the arbitrators shall make
specific and written findings of fact and conclusions of law. In all
arbitration proceedings in which the amount in controversy exceeds $100,000.00,
in the aggregate, the Parties shall have in addition to the statutory right to
seek vacation or modification of any award pursuant to applicable law, the right
to seek vacation or modification of any award that is based in whole, or in
part, on an incorrect or
<PAGE>
erroneous ruling of law by appeal to an appropriate court having
jurisdiction; provided, however, that any such application for vacation or
modification of an award based on an incorrect ruling of law must be filed in
a court having jurisdiction over the Dispute within 15 days from the date the
award in rendered. The arbitrators' findings of fact shall be binding on all
Parties and shall not be subject to further review except as otherwise
allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in writing
by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the
headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this
Arbitration Program shall survive any termination, amendment, or expiration of
the Documents, unless the Parties otherwise expressly agree in writing making
specific reference to this Arbitration Program. To the extent permitted by
applicable law, the arbitrator shall have the power to award recovery of all
costs and fees (including attorney's fees, administrative fees, and arbitrators'
fees) to the prevailing Party. This Arbitration Program may be amended,
changed, or modified only by a writing which specifically refers to this
Arbitration Program and which is signed by all the Parties. If any term,
covenant, condition or provision of the Arbitration Program is found to be
unlawful or invalid or unenforceable, such illegality or invalidity or
unenforceable shall not affect the legality, validity or enforceability of the
remaining parts of this Arbitration Program, and all such remaining parts hereof
shall be valid and enforceable and have full force and effect as if the illegal,
invalid or unenforceable part had not been included. Each Party agrees to keep
all Disputes and arbitration proceedings strictly confidential, except for
disclosures of information required in the ordinary course of business of the
Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be found
to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect. In lieu of such
provision, there shall be added automatically as part of this Agreement, a
provision as similar in its terms to such provision as may be possible and be
legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
JACKSON DENTAL PARTNERSHIP
a Texas partnership
By: /s/ Penn Jackson, Sr.
----------------------------
Penn Jackson, Sr., Partner
By: /s/ Penn Jackson, Jr.
----------------------------
Penn Jackson, Jr., Partner
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
----------------------------
Its: Senior Vice President
----------------------------
/s/ Penn Jackson, Sr.
--------------------------------
Penn Jackson, Sr. D.D.S.
/s/ Penn Jackson, Jr.
--------------------------------
Penn Jackson, Jr. D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 Existence; Good Standing; Partners/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
and
BRUCE A. KANEHL, D.D.S.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 3
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 3
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 7
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 7
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 8
3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4. COVENANTS OF DENTIST.
4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
<S> <C>
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 9
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 9
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . 10
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 10
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 10
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . . . . . . 10
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 11
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 11
Section 6. COVENANTS OF PENTEGRA AND DENTIST
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 12
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 12
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 12
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 12
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8. DENTIST'S CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 13
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9. CLOSING DELIVERIES
<PAGE>
<S> <C>
9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . . . . . . 16
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 17
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 19
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . 20
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . 21
14.12 NO RULE OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . . 21
14.13 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.14 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.15 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.16 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as
of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware
corporation ("Pentegra") and BRUCE A. KANEHL, D.D.S. ("Dentist").
WITNESSETH:
WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires
to receive from Dentist, certain assets of Dentist;
WHEREAS, Pentegra or its affiliated designee has entered into or intends to
enter into Agreements and Plans of Reorganization, Asset Contribution Agreements
and other acquisition agreements (collectively, the "Other Agreements") with
such persons or entities or the stockholders of such entities listed on EXHIBIT
A (together with Dentist, the "Target Companies");
WHEREAS, it is intended for Federal income tax purposes that the transfers
contemplated by this Agreement, the Other Agreements and Pentegra's initial
public offering ("Initial Public Offering") of shares of its common stock, par
value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange
within the meaning of Section 351 of the Internal Revenue Code of 1986, as
amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock
is consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions
contained herein, on the Closing Date, Dentist shall convey, transfer, deliver
and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all
of Dentist's right, title and interest in and to those certain assets described
on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively
"Assets"), free and clear of all obligations, security interests, claims, liens
and encumbrances, except as specifically assumed, or taken subject to, by
Pentegra pursuant to SECTION 1.3(b) hereof.
<PAGE>
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and contributed hereunder, and Dentist shall retain all of its
right, title and interest in and to, the assets not specifically transferred
hereunder, including without limitation, the assets described on EXHIBIT 1.2
(the "Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Dentist contained
herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Dentist the consideration specified in
ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b)
attached hereto to the extent that such obligations, commitments, liabilities
and indebtedness are current and not otherwise in default. (the "Assumed
Liabilities"). Notwithstanding any contrary provision contained herein,
Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i)
any liability, commitment or obligation or trade payable or indebtedness not
specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on
EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default
under such contracts, leases, commitments or obligations which occurred on or
before the Closing Date; (iii) any liability for any employee benefits
payable to employees of Dentist, including, but not limited to, liabilities
arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any
liability based upon or arising out of a violation of any antitrust or
similar restraint-of-trade laws by Dentist, including, without limiting the
generality of the foregoing, any such antitrust liability which may arise in
connection with agreements, contracts, commitments or orders for the sale of
goods or provision of services by Dentist reflected on the books of Dentist
at or prior to the Closing Date; (v) any liability based upon or arising out
of any tortious or wrongful actions of Dentist, any licensed professional
employee or independent contractor of Dentist, (vi) any liability for the
payment of any taxes of Dentist, including without limitation, sales, use and
other transfer taxes and income taxes arising from or by reason of the
transactions contemplated by this Agreement; (vii) any indebtedness secured
by deeds of trust or mortgages on real property; nor (viii) any liability
incurred or to be incurred pursuant to any malpractice or other suits or
actions pending against Dentist.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement, the
Dentist shall execute and deliver all such deeds, bills of sale, assignments and
assurances and take and do all such other actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right, title and interest
in, to and under the Assets in Pentegra or otherwise to carry out this
Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
Dentist hereby represents and warrants to Pentegra as follows:
2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the
State of Florida. Dentist does not have any assets, employees or offices in any
state other than the state set forth in the first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and
perform this Agreement and the other agreements to be executed and delivered in
connection herewith. This Agreement
and all agreements and documents executed and delivered in connection
herewith have been, or will be as of the Closing Date, duly executed and
delivered by Dentist and constitute or will constitute the legal, valid and
binding obligations of Dentist in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of
consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, result in the acceleration of, any obligation
under any mortgage, lien, lease, agreement, rent, instrument, order,
arbitration award, judgment or decree to which Dentist is a party or by which
Dentist is bound, or violate any material restrictions of any kind to which
Dentist is subject, or result in any lien or encumbrance on any of Dentist's
assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets, or
waivers thereof, have been duly obtained and are in full force and effect and
are described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Dentist, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses or
permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Dentist.
2.5 [INTENTIONALLY DELETED].
2.6 [INTENTIONALLY DELETED].
2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any related
unaudited statements of income, retained earnings, schedule of accounts
receivable, accounts payable and accrued liabilities, and cash flows for the
twelve months then ended (collectively, with the related notes thereto, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and results of operations of Dentist as of the dates and for the
periods indicated and reflect all fixed and contingent liabilities of Dentist.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Dentist leases, as lessor or lessee, real or personal property
used in operating the Business, related to the Assets or otherwise. All such
leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their
respective terms, and there is not under any such lease any existing default by
Dentist, as lessor or lessee, or any condition or event of which Dentist has
knowledge which with notice or lapse of time, or both, would constitute a
default, in respect of which Dentist has not taken adequate steps to cure such
default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Dentist has no knowledge of any
latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and
marketable title to all
<PAGE>
of the Assets, free and clear of any liens, claims, charges, exceptions or
encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10
attached hereto. Dentist shall cause all encumbrances set forth on EXHIBIT
2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be
released or terminated prior to the Closing Date and evidence of such
releases of liens and claims shall be provided to Pentegra on the Closing
Date and the Assets shall not be used to satisfy such liens, claims or
encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned or
used by Dentist, are in good, current, standard and merchantable condition and
are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Dentist has no right, title or interest in or to patents, patent rights,
corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT
2.12 is a listing of all names of all predecessor companies of Dentist,
including the names of any entities from whom Dentist previously acquired
significant assets. Except for off-the-shelf software licenses and except as
set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of any patents,
trademarks, service marks, trade names, copyrights or applications therefor, or
manufacturing processes, formulas or trade secrets or similar items and no such
licenses are necessary for the conduct of the Business or the use of the Assets.
No claim is pending or has been made to the effect that the Assets or the
present or past operations of Dentist in connection with the Assets or Business
infringe upon or conflict with the asserted rights of others to any patents,
patent rights, manufacturing processes, trade names, trademarks, service marks,
inventions, licenses, specialized treatment protocols, copyrights, formulas,
know-how and trade secrets. Dentist has the sole and exclusive right to use all
Assets constituting proprietary rights without infringing or violating the
rights of any third parties and no consents of any third parties are required
for the use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on
EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this
Agreement of: (a) the most recent payroll report of Dentist, showing all current
employees of Dentist and their current levels of compensation, (b) promised
increases in compensation of employees of Dentist that have not yet been
effected, (c) oral or written employment agreements, consulting agreements or
independent contractor agreements (and all amendments thereto) to which Dentist
is a party, copies of which have been delivered to Pentegra, and (d) all
employee manuals, materials, policies, procedures and work-related rules, copies
of which have been delivered to Pentegra. Dentist is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Dentist has not engaged in any unfair labor practice.
There are no unfair labor practices charges or complaints pending or threatened
against Dentist, and Dentist has never been a party to any agreement with any
union, labor organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the
Assets is subject to any pending, nor does Dentist have knowledge of any
threatened, litigation, governmental investigation, condemnation or other
proceeding against or relating to or affecting Dentist, the Business, the Assets
or the transactions contemplated by this Agreement, and, to the knowledge of
Dentist, no basis for any such action exists, nor is there any legal impediment
of which Dentist has knowledge to the continued operation of its business or the
use of the Assets in the ordinary course, subject to consents set forth on
EXHIBIT 2.4.
2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts, obligations
and commitments of Dentist ("Contracts"), entered into in connection with and
related to the Assets or the Business, all of which are listed or incorporated
by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case
of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than
leases) attached hereto. Except as otherwise indicated on such Exhibits, all of
such Contracts are valid, binding and enforceable in accordance with their terms
and are in full force and effect, and no defenses, offsets or counterclaims have
been asserted or may be made by any party thereto.
<PAGE>
Except as indicated on such Exhibits, there is not under any such Contract
any existing default by Dentist, or any condition or event of which Dentist
has knowledge which with notice or lapse of time, or both, would constitute a
default. Dentist has no knowledge of any default by any other party to such
Contracts. Dentist has not received notice of the intention of any party to
any Contract to cancel or terminate any Contract and have no reason to
believe that any amendment or change to any Contract is contemplated by any
party thereto. Other than those contracts, obligations and commitments
listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist is not a party
to any material written or oral agreement contract, lease or arrangement,
including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product or
service;
(h) Loan agreement or other contract for money borrowed or lent or to
be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of the
Dentist, oral or written, that provide for prepayments or deferred installment
payments; or
(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Dentist on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) or entered into any contract, lease, license or
commitment, except in connection with the performance of this Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued, contingent
or otherwise) other than (i) liabilities shown or reflected on the Balance
Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary
course of business;
(c) Made any payments to or loaned any money to any person or entity
other than in the ordinary course of business;
<PAGE>
(d) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(e) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have been
required due to income or operations of Dentist since the Balance Sheet Date;
(f) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(g) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(h) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants or
agents, or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of any officer, employee, consultant or agent;
(i) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00);
(j) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(k) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties, assets
or business or the Business or the Assets, or experienced any other material
adverse change in its financial condition, assets, prospects, liabilities or
business; or
(l) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it. All such tax returns are complete and accurate in all respects and
properly reflect the relevant taxes for the periods covered thereby. Dentist
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Dentist. There are no audits relating to taxes of
Dentist pending or in process or, to the knowledge of Dentist, threatened.
Dentist is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency. There are no
liens or encumbrances relating to taxes on or threatened against any of the
assets of Dentist. Dentist has withheld and paid all taxes required by law to
have been withheld and paid by it. Neither Dentist nor any predecessor of
Dentist is or has been a party to any tax allocation or sharing agreement or a
member of an affiliated group of corporations filing a consolidated Federal
income tax return. Dentist has delivered to Pentegra correct and complete
copies of Dentist's three most recently filed annual state, local and Federal
income tax returns, together with all examination reports and statements of
deficiencies assessed against or agreed to by Dentist during the three calendar
year period preceding the date of this Agreement. Dentist has neither made any
payments, is obligated to make any payments, or is a party to any agreement that
under any circumstance could obligate it to make any payments that will not be
deductible under Code section 280G.
(b) Dentist does not intend to dispose of any of the shares of Pentegra
Common Stock to be received hereunder and is not a party to any plan,
arrangement or agreement for the disposition of such shares.
<PAGE>
Nothing contained herein shall prohibit Dentist from selling such shares of
Pentegra Common Stock after the designated holding period and in accordance
with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated by
this Agreement which may be now or hereafter asserted against Pentegra, Dentist
resulting from any action taken by Dentist or their respective agents or
employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against
on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and
has not incurred since that date and will not have incurred as of the Closing
Date, any liabilities or obligations of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, other than those
incurred in the ordinary course of business or as set forth on EXHIBIT 2.16.
Dentist does not know, or have reasonable grounds to know, of any basis for the
assertion against Dentist as of the Balance Sheet Date, of any claim or
liability of any nature in any amount not fully reflected or reserved against on
the Balance Sheet, or of any claim or liability of any nature arising since that
date other than those incurred in the ordinary course of business or
contemplated by this Agreement. All indebtedness of Dentist (including without
limitation, indebtedness for borrowed money, guaranties and capital lease
obligations) is described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist
carries property, liability, malpractice, workers' compensation and such other
types of insurance as is customary in the industry. Valid and enforceable
policies in such amounts are outstanding and duly in force and will remain duly
in force through the Closing Date. All such policies are described in EXHIBIT
2.20 attached hereto and true and correct copies have been delivered to
Pentegra. Dentist has not received notice or other communication from the
issuer of any such insurance policy cancelling or amending such policy or
threatening to do so. Neither Dentist nor any licensed professional employee of
Dentist has any outstanding claims, settlements or premiums owed against any
insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached
hereto, Dentist has neither established, nor maintains, nor is obligated to make
contributions to or under or otherwise participate in, (a) any bonus or other
type of compensation or employment plan, program, agreement, policy, commitment,
contract or arrangement (whether or not set forth in a written document); (b)
any pension, profit-sharing, retirement or other plan, program or arrangement;
or (c) any other employee benefit plan, fund or program, including, but not
limited to, those described in SECTION 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT
2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been
operated and administered in all material respects in accordance with all
applicable laws, rules and regulations, including without limitation, ERISA, the
Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of
1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination
in Employment Act of 1967, as amended, and the related rules and regulations
adopted by those Federal agencies responsible for the administration of such
laws. No act or failure to act by Dentist has resulted in a "prohibited
transaction" (as defined in ERISA) with respect to the Dentist Plans. No
"reportable event" (as defined in ERISA) has occurred with respect to any of the
Dentist Plans. Dentist has not previously made, is not currently making, and is
not obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Dentist Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at least equal to the value
of plan liabilities or (ii) the value of plan liabilities in excess of plan
assets is disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing
Date, a party to any agreement or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree, rule or
regulation that materially and adversely affects the condition (financial or
<PAGE>
otherwise), operations, assets, liabilities, business or prospects of Dentist,
the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed
professional employees, and the conduct of the Business and use of the Assets,
have complied with all applicable laws, rules, regulations and licensing
requirements, including, without limitation, the Federal Environmental
Protection Act, the Occupational Safety and Health Act, the Americans with
Disabilities Act and any environmental laws and medical waste laws, and there
exist no violations by Dentist or any licensed professional employee of Dentist
of any Federal, state or local law or regulation. Dentist has not received any
notice of a violation of any Federal, state and local laws, regulations and
ordinances relating to the operations of the Business and Assets and no notice
of any pending inspection or violation of any such law, regulation or ordinance
has been received by Dentist.
2.24 THIRD PARTY PAYORS. Dentist and each licensed professional employee
or independent contractor of Dentist has timely filed all claims or other
reports required to be filed with respect to the purchase of services by
third-party payors, and all such claims or reports are complete and accurate,
and has no liability to any payor with respect thereto. There are no pending
appeals, overpayment determinations, adjustments, challenges, audit,
litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Dentist and each
licensed professional employee of Dentist. Neither Dentist nor any licensed
professional employee of Dentist has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Dentist and Dentist's licensed professional employees has not (a) knowingly
and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist
in this Agreement, and no Exhibit or certificate issued or executed by, or
information furnished by Dentist or to be furnished by Dentist to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Dentist has with any bank or other
financial institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or
employee or family member of Dentist, or their respective spouses, children or
affiliates, owns directly or indirectly, on an individual or joint basis, any
interest in, has a compensation or other financial arrangement with, or serves
as an officer or director of, any customer or supplier or competitor of Dentist
or any organization that has a material contract or arrangement with Dentist.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of
the names and addresses of each payor of Dentist's services which accounted for
more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has
good relations with all such payors and other material payors of Dentist and
none of such payors has notified Dentist that it intends to discontinue its
relationship with Dentist or to deny
<PAGE>
any claims submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Dentist as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions required
by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize
the execution, delivery and performance of this Agreement and such related
documents. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing Date,
duly executed and delivered by Pentegra and constitute or will constitute the
legal, valid and binding obligations of Pentegra, enforceable against Pentegra
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and delivery
of this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and, the
consummation of the actions contemplated hereby will not, violate any provision
of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or decree
to which Pentegra is a party or by which Pentegra is bound, or violate any
material restrictions of any kind to which Pentegra is subject, or result in any
lien or encumbrance on any of Pentegra's assets. Other than as have been
obtained or as would not have a material adverse effect, there are no consents
of any person or entity required for the transaction contemplated hereby on
behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would
not have a material adverse effect, there are no proceedings pending or, to
the knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any pending,
nor does Pentegra have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Pentegra, its business, assets or the transactions contemplated by
this Agreement, and, to the knowledge of Pentegra, no basis for any such action
exists, nor is there any legal impediment of which Pentegra has knowledge to the
continued operation of its business or the use of its Assets in the ordinary
course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports and
other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it, other than as would not have a material adverse effect. Pentegra
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Pentegra. There are no audits relating to taxes of
Pentegra pending or in process or, to the knowledge of Pentegra, threatened.
Pentegra is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency.
<PAGE>
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra
in this Agreement, and no Exhibit or certificate issued by officers or directors
of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements or facts contained therein not
misleading.
SECTION 4. COVENANTS OF DENTIST.
Dentist agrees that between the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and conditions. Dentist agrees to complete the
Exhibits hereto to be provided by him in form and substance satisfactory to
Pentegra.
4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the
Assets in the ordinary course. Dentist shall not enter into any lease,
contract, indebtedness, commitment, purchase or sale or acquire or dispose of
any capital asset relating to the Business or the Assets except in the ordinary
course of business. Dentist shall use their best efforts to preserve the
Business and Assets intact and shall not take any action that would have an
adverse effect on the Business or Assets. Dentist shall use their best efforts
to preserve intact the relationships with payors, customers, suppliers, patients
and others having significant business relations with Dentist. Dentist shall
collect its receivables and pay its trade payables in the ordinary course of
business. Dentist shall not introduce any new method of management, operations
or accounting.
4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized
representatives access to, and make available for inspection, all of the assets
and business of Dentist, the Business and the Assets, including employees,
customers and suppliers and permit Pentegra and its authorized representatives
to inspect and make copies of all documents, records and information with
respect to the business or assets of Dentist, the Business or the Assets as
Pentegra or its representatives may request. Dentist shall promptly notify
Pentegra in writing of (a) any notice or communication relating to a default or
event that, with notice or lapse of time or both, could become a default, under
any contract, commitment or obligation to which Dentist is a party or relating
to the Business or the Assets, and (b) any adverse change in Dentist's or the
Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall
use his best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby, including
consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain
all licenses, permits, approvals or other authorizations required under any law,
rule, regulation, or otherwise to
<PAGE>
provide the services of the Practice contemplated by the Service Agreement
and to conduct the intended business of the Practice and operate the Business
and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of Closing or the termination of this Agreement in accordance with the
provisions hereof, Dentist shall not, and shall use its best efforts to cause
Dentist's employees, agents and representatives not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making or implementation
of any proposal or offer, including without limitation, any proposal or offer to
the Dentist, with respect to a merger, acquisition, consolidation or similar
transaction involving, or the purchase of all or any significant portion of the
assets or any equity securities of Dentist or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to such proposal or offer, and Dentist
will immediately cease any such activities, discussions or negotiations
heretofore conducted with respect to any of the foregoing. Dentist shall
immediately notify Pentegra if any such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund completely
for any accrued benefits, where applicable, or vested accrued benefits for which
Dentist or any entity might have any liability whatsoever arising from any
insurance, pension plan, employment tax or similar liability of Dentist to any
employee or other person or entity (including, without limitation, any Dentist
Plan and any liability under employment contracts with Dentist) allocable to
services performed prior to the Closing Date. Dentist acknowledges that the
purpose and intent of this covenant is to assure that Pentegra shall have no
liability whatsoever at any time after the Closing Date with respect to any of
Dentist's employees or similar persons or entities, including, without
limitation, any Dentist Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of the Dentist (other than in the ordinary course of business) or other employee
or an independent contractor of Dentist, adopt, amend or terminate any
compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect upon Dentist, its business, assets or
prospects.
4.8 [INTENTIONALLY OMITTED].
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best
efforts to take, or cause to be taken, all actions necessary to effect the
acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material
respect the tax or financial accounting methods or practices followed by Dentist
(including any material change in any assumption underlying, or any method of
calculating, any bad debt, contingency or other reserve), except as may be
required by law or generally accepted accounting principles. Dentist will
duly, accurately and timely (without regard to any extensions of time) file all
returns, information statements and other documents relating to taxes of Dentist
required to be filed by it, and pay all taxes required to be paid by it, on or
before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive
any compliance with the applicable state Bulk Transfers Act, if any. Dentist
covenants and agrees that all of the creditors with respect to the Business and
the Assets will be paid in full by Dentist prior to the Closing Date, except to
extent that any liability to such creditors is assumed by Pentegra pursuant to
this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with
proof of payment of all creditors with respect to the Business and
<PAGE>
the Assets. Notwithstanding the foregoing, Dentist may dispute the validity
or amount of any such creditor's claim without being deemed to be in
violation of this SECTION 4.11, provided that such dispute is in good faith
and does not unreasonably delay the resolution of the claim and provided,
further that Dentist agrees to indemnify and bond Pentegra for such amounts
as is satisfactory to Pentegra.
4.12 LEASE. If Dentist leases any of its premises from the Dentist or
other affiliate of Dentist, Pentegra shall have entered into a building lease
(the "Building Lease") with the owner of such premises on terms and conditions
satisfactory to Pentegra, the terms and conditions of which shall include,
without limitation, (i) a five year initial term plus three five-year renewal
options, (ii) a lease rate equal to the fair market value lease rate, as agreed
to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made
by Pentegra for the purpose of allowing Pentegra to hire those non-dental
employees of Dentist designated by Pentegra, such employment to be effective as
of the Closing Date. Notwithstanding the above, Dentist shall remain liable
under any Dentist Plans for any claims incurred by any employees or their
spouses or dependents, and for all compensation, bonuses, benefits and other
such items and other liabilities related to Dentist's employees incurred by
Dentist prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all
employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be
treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and
shall be treated as Clinic employees for purposes of eligibility and
participation in Dentist Plans.
4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective as
of the Closing Date.
4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited
liability company, partnership or other legal entity (the "Practice") approved
by Pentegra for the purpose of practicing dentistry and entering into the
Service Agreement. The Practice shall be duly organized, in existing and in
good standing under the laws of the State in which the Dentist and the Practice
are to practice dentistry. The Practice shall have all necessary power to own
all of its assets and to carry on its business as such business is now being
conducted. The Dentist shall be the sole member/shareholder/partner of the
Practice and own all such interests free of all security interests, claims,
encumbrances and liens. Each interest in the Practice shall be legally and
validly issued and fully paid and nonassessable. There shall be no outstanding
(a) bonds, debentures, notes or other obligations the holders of which have the
right to vote with the members/partners/shareholders of the Practice on any
matter, (b) securities of the Practice convertible into equity interests in the
Practice, or (c) commitments, options, rights or warrants to issue any such
equity interests in the Practice, to issue securities of the Practice
convertible into such equity interests, or to redeem any securities of the
Practice. No interests of the Practice shall have been issued or disposed of in
violation of the preemptive rights, rights of first refusal or similar rights of
any of the Practice's members/partners/shareholders. The Practice shall quality
to do business as a foreign entity in any other state or jurisdiction by reason
of its business, properties or activities in or relating to such other state or
jurisdiction.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations
and minutes of thePractice and all amendments thereto of the Practice shall have
been delivered to Pentegra and shall be in form and substance satisfactory to
Pentegra. The minute books of the Practice shall contain all accurate minutes
of the meetings of and consents to actions taken without meetings of the
members\managers/partners/board of directors of the Practice since its
formation. The books of account of the Practice shall have been kept accurately
in the ordinary course of business and the revenues, expenses, assets and
liabilities of the Practice shall have been properly recorded in such books.
<PAGE>
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements and
other documents to be executed and delivered by it pursuant to this Agreement,
including without limitation, the Service Agreement and each Employment
Agreement or to be executed and delivered on the Closing Date, and has taken all
action required by law, its Organization/Partnership Agreement/Articles of
Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution,
delivery and performance of such documents. The Service Agreement, the
Employment Agreement and the other agreements contemplated hereby shall have
been duly executed and delivered by the Practice and constitute or will
constitute the legal, valid and binding obligations of the Practice enforceable
against the Practice in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of the Service Agreement, the Employment Agreements and
the other agreements contemplated hereby will not violate any provision of the
organizational documents of the Practice or any provisions of, or result in the
acceleration of, any obligation under any mortgage, lien, lease, agreement,
rent, instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any material
restrictions of any kind to which the Practice is subject, or result in any lien
or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and has filed with the
proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND DENTIST.
Pentegra and Dentist agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to
promptly prepare and file with the Securities Exchange Commission ("SEC") the
Registration Statement on Form S-1 (or other appropriate Form) to be filed by
Pentegra in connection with its Initial Public Offering (including the
prospectus constituting a part thereof, the "Registration Statement"). Pentegra
shall obtain all necessary state securities laws or "Blue Sky" permits and
approvals required to carry out the transactions contemplated by this Agreement
and the Dentist shall furnish all information concerning Dentist as may be
reasonable requested in connection with any such action.
<PAGE>
Dentist represents and warrants that none of the information or documents
supplied or to be supplied by it specifically for inclusion in the Registration
Statement, by exhibit or otherwise, will, at the time the Registration Statement
and each amendment or supplement thereto, if any, becomes effective under the
Securities Act of 1933, 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, in light of the circumstances under which they were
made, not misleading. Dentist shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.
Dentist shall furnish Pentegra will all information concerning itself and
such other matters as may be reasonable requested by Pentegra in connection with
the preparation of the Registration Statement and each amendment or supplement
thereto, or any other statement, filing, notice or application made by or on
behalf of each such party or any of its subsidiaries to any governmental entity
in connection with the transactions contemplated by the Other Agreements or this
Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at or
prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Dentist contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Dentist prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Dentist shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Dentist, the Business and the Assets, the results of which shall
be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service Agreement"),
in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which
Pentegra will provide management services to the Practice. Dentist shall have
executed and delivered a Guaranty Agreement in substantially the form attached
as EXHIBIT 4.10 of the Service Agreement pursuant to which Dentist shall, among
other things, guaranty the obligations of the Practice under the Service
Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her
employment agreement and executed an employment agreement ("Employment
Agreement") with the Practice in form and
<PAGE>
substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to
Dentist and Pentegra.
7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary
government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly
executed in form satisfactory to Pentegra and its counsel, referred to in
SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or
payables between Dentist and its affiliates and Dentist shall not have any
liabilities, including indebtedness, guaranties and capital leases, that are not
set forth on EXHIBIT 2.19.
7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured
on irs liability insurance program in accordance with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Dentist since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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.
At or prior to the date that the Registration Statement is declared effective by
the SEC, Pentegra shall have received all state securities and "Blue Sky"
permits necessary to consummate the transactions contemplated hereby. The
Pentegra Common Stock shall have been approved for listing on Nasdaq or other
exchange selected by Pentegra, subject only to official notification of
issuance.
SECTION 8. DENTIST'S CONDITIONS PRECEDENT.
The obligations of Dentist hereunder are subject to fulfillment at or prior
to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Pentegra contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly
executed in form satisfactory to Dentist and its counsel, referred to in SECTION
9.2.
8.5 SECURITIES APPROVAL. 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.
At or prior to the date that the Registration Statement is declared effective by
the SEC, Pentegra shall have received all
<PAGE>
state securities and "Blue Sky" permits necessary to consummate the
transactions contemplated hereby. The Pentegra Common Stock shall have been
approved for listing on Nasdaq or other exchange selected by Pentegra,
subject only to official notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF DENTIST. Within five business days after requested by
Pentegra, Dentist shall deliver to Pentegra the following, all of which shall be
in a form satisfactory to counsel to Pentegra and shall be held by Jackson &
Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an
escrow agreement or letter agreement in form and substance mutually acceptable
to the parties hereto:
(a) an executed original Service Agreement and executed originals of
all documents required by that agreement, including but not limited to the
Guaranty Agreemen and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a bill of sale conveying the Assets to Pentegra;
(d) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(e) certificates of Dentist dated as of the Closing Date, (i) as to
the truth and correctness of the representations and warranties of Dentist
contained herein; (ii) as to the performance of and compliance by Dentist with
all covenants contained herein; and (iii) certifying that all conditions
precedent of Dentist to the Closing have been satisfied;
(f) an opinion of counsel to Dentist opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Dentist, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Pentegra;
(g) non-foreign affidavits executed by Dentist;
(h) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(i) an executed Registration Rights Agreement between Pentegra and
Dentist, in substantially the form attached hereto as EXHIBIT 9.1(L) (the
"Registration Rights Agreement"); and
(j) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall
deliver to Dentist the following, all of which shall be in a form satisfactory
to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for
Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter
agreement in form and substance mutually acceptable to the parties hereto:
(a) the Acquisition Consideration;
<PAGE>
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance of
this Agreement and all related documents and agreements each certified by the
Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii) certifying
that all conditions precedent of Pentegra to the Closing have been satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and the
State of incorporation of Dentist;
(h) an opinion of counsel to Pentegra opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Pentegra, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Dentist;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Dentist to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in
any Exhibit attached hereto, any agreement executed pursuant hereto, and any
certificate executed and delivered by any party pursuant to the terms of this
Agreement, shall constitute representations and warranties of Dentist or of
Pentegra, as the case may be. All such representations and warranties, and all
representations and warranties expressly labeled as such in this Agreement shall
survive the date of this Agreement and the Closing Date for a period of five (5)
years following the Closing Date, except that (i) the representations and
warranties with respect to environmental and medical waste laws and health care
laws and matters shall survive for a period of fifteen (15) years and tax
representations shall survive until one year after the expiration of the
applicable statute of limitations. Each party covenants with the other parties
not to make any claim with respect to such representations and warranties,
against any party after the date on which such survival period shall terminate.
No party shall be entitled to claim indemnity from any other party pursuant to
SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice
required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party
hereby releases, acquits and discharges the other party from any and all claims
and demands, actions and causes of action, damages, costs, expenses and rights
of setoff with respect to which the notices required by SECTION 10.2, 10.3 or
10.4, as applicable, are not timely provided.
<PAGE>
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION
10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES
(INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL
THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY
PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF,
OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION
10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS
AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS
SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED
PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS,
DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT
LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING
FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S
<PAGE>
MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE
ASSETS, AND
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR AFTER
THE CLOSING DATE,
(D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE
FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING
FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY
PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR
AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION,
PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE
OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(B), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS
COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS,
THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the defense
of such action or proceeding, such Indemnified Person shall notify Indemnitor
thereof. If any such action or other proceeding shall be brought against any
Indemnified Person, Indemnitor shall, upon written notice given within a
reasonable time following receipt by Indemnitor of such notice from Indemnified
Person, be entitled
<PAGE>
to assume the defense of such action or proceeding with counsel chosen by
Indemnitor and reasonably satisfactory to Indemnified Person; provided,
however, that any Indemnified Person may at its own expense retain separate
counsel to participate in such defense. Notwithstanding the foregoing,
Indemnified Person shall have the right to employ separate counsel at
Indemnitor's expense and to control its own defense of such action or
proceeding if, in the reasonable opinion of counsel to such Indemnified
Person, (a) there are or may be legal defenses available to such Indemnified
Person or to other Indemnified Persons that are different from or additional
to those available to Indemnitor and which could not be adequately advanced
by counsel chosen by Indemnitor, or (b) a conflict or potential conflict
exists between Indemnitor and such Indemnified Person that would make such
separate representation advisable; provided, however, that in no event shall
Indemnitor be required to pay fees and expenses hereunder for more than one
firm of attorneys of Indemnified Person in any jurisdiction in any one action
or proceeding or group of related actions or proceedings. Indemnitor shall
not, without the prior written consent of any Indemnified Person, settle or
compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding to which such Indemnified Person is a
party unless such settlement, compromise or consent includes an unconditional
release of such Indemnified Person from all liability arising or potentially
arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Dentist giving rise to indemnification
under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset
the amount of damages incurred by it as a result of such breach of warranty,
representation, covenant or agreement against any amounts payable by Pentegra,
including the amounts payable under the Service Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Dentist
contained in this Agreement or in any certificate or other document executed and
delivered by Dentist pursuant to this Agreement is or becomes untrue or breached
in any material respect or if Dentist fails to comply in any material respect
with any covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
(c) at any time by Dentist if any representation or warranty of Pentegra
contained in this Agreement or in any certificate or other document executed and
delivered by Pentegra pursuant to this Agreement is or becomes untrue or
breached in any material respect or if Pentegra fails to comply in any material
respect with any covenant or agreement contained herein and such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra or Dentist if the transaction contemplated hereby shall
not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Dentist, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date,
Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber,
pledge, distribute, appoint or otherwise dispose of
<PAGE>
(i) any shares of Pentegra Common Stock received by such party hereunder,
(ii) any interest (including without limitation, an option to buy or sell) in
any shares of Pentegra Common Stock, in whole or in part, and no such
attempted transfer shall be treated as effective for any purpose or (b)
engage in any transaction, whether or not with respect to any shares of
Pentegra Common Stock or any interest therein, the intent or effect of which
is to reduce the risk of owning shares of Pentegra Common Stock. The
certificates evidencing the Pentegra Common Stock delivered to Dentist
pursuant to the terms hereof will bear a legend substantially in the form set
forth below and containing such other information as Pentegra may deem
necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the
shares of Pentegra Common Stock to be delivered to Dentist pursuant to this
Agreement have not been and will not be registered under the Securities Act of
1933 and may not be resold without compliance with the Securities Act of 1933.
The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement
is being acquired solely for its own account, for investment purposes only and
with no present intention of distributing, selling or otherwise disposing of it
in connection with a distribution. Dentist covenants, warrants and represents
that none of the shares of Pentegra Common Stock issued to it will be offered,
sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
except after full compliance with all of the applicable provisions of the
Securities Act, as amended, and the rules and regulations of the Securities
Exchange Commission and applicable state securities laws and regulations. All
certificates evidencing shares of Pentegra Common Stock shall bear the following
legend in addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Dentist resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic
risk of an investment in Pentegra Common Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and has such
knowledge and experience in financial and business matters that they are capable
of evaluating the merits and risks of the proposed investment and therefore have
the capacity to protect its own interests in connection with the acquisition of
the Pentegra Common Stock. Dentist and its representatives have had an adequate
opportunity to ask questions and receive answers from the officers of Pentegra
concerning any and all matters relating to the background and experience of the
officers and directors of Pentegra, the plans for the operations of the business
of Pentegra, and any plans for additional acquisitions and the like. Dentist
and its representatives have asked any and all questions in the nature described
in the preceding sentence and all questions have been answered to their
satisfaction. Dentist is an "accredited investors" as defined in Regulation D
of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes
and acknowledges that it had in the past, currently have, and in the future may
possibly have, access to certain confidential information of Pentegra that is
valuable, special and unique assets of Pentegra's businesses. Dentist agrees
that it will not
<PAGE>
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally
through no fault of Dentist, (ii) disclosure is required by law or the order
of any governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), Dentist shall, if
possible, give prior written notice thereof to the other parties hereto, and
provide such other parties hereto with the opportunity to contest such
disclosure, (iii) Dentist reasonably believes that such disclosure is
required in connection with the defense of a lawsuit against the disclosing
party, or (iv) Dentist is the sole and exclusive owner of such confidential
information as a result of the transactions contemplated hereunder or
otherwise. In the event of a breach or threatened breach by Dentist of the
provisions of this SECTION 13, Pentegra shall be entitled to an injunction
restraining Dentist from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting Pentegra from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages. The obligations of the parties under this
SECTION 13 shall survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement, together with the transactions contemplated by the Other
Agreement and the Initial Public Offering, will qualify as an exchange meeting
the requirements of Section 351 of the Code. The tax returns (and schedules
thereto) of Dentist and Pentegra shall be filed in a manner consistent with
such intention and Dentist and Pentegra shall each provide the other with such
tax information, reports, returns or schedules as may be reasonably required to
assist the other in so reporting the transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery, or by
facsimile AND overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Dentist:
To address set forth on EXHIBIT 14.2
with a copy to:
<PAGE>
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this Agreement,
whether or not such transactions are consummated. Without limiting the
generality of the foregoing and whether or not such liabilities may be deemed to
have been incurred in the ordinary course of business, Pentegra shall not be
liable to or required to pay, either directly or indirectly, any fees and
expenses of legal counsel, accountants, auditors or other persons or entities
retained by Dentist for services rendered in connection with negotiating and
closing the transactions contemplated by this Agreement or the documents to be
executed in connection herewith, whether or not such costs or expenses are
incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure, either
written or oral, regarding the transactions contemplated by this Agreement
without the prior written consent of the other party, provided that the
foregoing shall not prohibit any disclosure (a) by press release, filing or
otherwise that Pentegra has determined in good faith judgment to be required by
Federal securities laws or the rules of the National Association of Securities
Dealers, (b) to attorneys, accountants, investment bankers or other agents of
the parties assisting the parties in connection with the transactions
contemplated by this Agreement, and (c) by Pentegra in connection with the
conduct of its Initial Public Offering and conducting an examination of the
operations and assets of Dentist.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are
integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and not
only in connection with the specific representation in which they are explicitly
referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS
ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY
AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR
ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one and the same
instrument
<PAGE>
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any entity
that, through one or more intermediaries is, controlled, controlled by or under
common control with, Pentegra. Upon any such assignment prior to the Closing,
all references herein to Pentegra (including those to Pentegra Common Stock)
shall be deemed to include references to the assignee and the assignee's common
stock. Notwithstanding any such assignment, Pentegra shall not, absent a
written release from Dentist, be relieved from its obligations to Dentist under
this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Dentist, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a pro
rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing, and
signed by the parties hereto. The waiver of any of the terms and conditions of
this Agreement shall not be construed as a waiver of any other terms and
conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist
(hereinafter referred to as a "Party"), whether made before or after the
institution of any legal proceeding, any dispute among the parties hereto in
any way arising out of, related to, or in connection with this Agreement
(hereinafter a "Dispute"), shall be resolved by binding arbitration in
accordance with the terms of this Section (hereinafter the "Arbitration
Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in accordance
with the terms of this Arbitration Program, the Commercial Arbitration Rules of
the AAA. In the event of any inconsistency between this Arbitration Program and
those rules or statutes, then the terms of this Arbitration Program shall
control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been completed
and the arbitrators have determined each party's post-arbitration obligations
and responsibilities as it relates to such warranties and covenants. No
provision of, nor the exercise of any rights under, this Arbitration Program
shall limit the right of any Party at any time to seek or use ancillary or
preliminary judicial or non-judicial self help remedies for the purposes of
obtaining, perfecting, preserving, or foreclosing upon any personal property in
which there has been granted a security interest or lien by a Party in the
Documents. In Disputes involving indebtedness or other monetary obligations,
each Party agrees that the other
<PAGE>
Party may proceed against all liable persons, jointly and severally against
one or more of them, without impairing rights against other liable persons.
Nor shall a Party be required to join the principal obligor or any other
liable persons (e.g., sureties or guarantors) in any proceeding against a
particular person. A Party may release or settle with one or more liable
persons as the Party deems fit without releasing or impairing rights to
proceed against any persons not so released. All statutes of limitation that
would otherwise be applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing, of
that Party's desire to arbitrate a dispute; and each Party shall, within twenty
(20) days from the date such notification is received, select an arbitrator, and
those two arbitrators shall select a third arbitrator within ten (10) days
thereafter. The issues or claims in dispute shall be committed to writing,
separately stated and numbered, and each party's proposed answers or contentions
shall be signed below the questions. Failure by a party to select an arbitrator
within the prescribed time period shall serve as that Party's acquiescence and
acceptance of the other party's selection of arbitrator. The arbitrators shall
resolve all Disputes in accordance with the applicable substantive law. Any
Dispute shall be decided by a majority vote of three arbitrators, unless the
claim or amount in controversy does not exceed $100,000.00, in which case a
single arbitrator (who shall have authority to render a maximum award of
$100,000.00, including all damages of any kind, costs and fees) may decide the
Dispute. The arbitrators may grant any remedy or relief that the arbitrators
deem just and equitable and within the scope of this Arbitration Program. The
arbitrators may also grant such ancillary relief as is necessary to make
effective the award. In all arbitration proceedings the arbitrators shall make
specific and written findings of fact and conclusions of law. In all
arbitration proceedings in which the amount in controversy exceeds $100,000.00,
in the aggregate, the Parties shall have in addition to the statutory right to
seek vacation or modification of any award pursuant to applicable law, the right
to seek vacation or modification of any award that is based in whole, or in
part, on an incorrect or erroneous ruling of law by appeal to an appropriate
court having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must be
filed in a court having jurisdiction over the Dispute within 15 days from the
date the award in rendered. The arbitrators' findings of fact shall be binding
on all Parties and shall not be subject to further review except as otherwise
allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in writing
by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the
headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this
Arbitration Program shall survive any termination, amendment, or expiration of
the Documents, unless the Parties otherwise expressly agree in writing making
specific reference to this Arbitration Program. To the extent permitted by
applicable law, the arbitrator shall have the power to award recovery of all
costs and fees (including attorney's fees, administrative fees, and arbitrators'
fees) to the prevailing Party. This Arbitration Program may be amended,
changed, or modified only by a writing which specifically refers to this
Arbitration Program and which is signed by all the Parties. If any term,
covenant, condition or provision of the Arbitration Program is found to be
unlawful or invalid or unenforceable, such illegality or invalidity or
unenforceable shall not affect the legality, validity or enforceability of the
remaining parts of this Arbitration Program, and all such remaining parts hereof
shall be valid and enforceable and have full force and effect as if the illegal,
invalid or unenforceable part had not been included. Each Party agrees to keep
all Disputes and arbitration proceedings strictly confidential, except for
disclosures of information required in the ordinary course of business of the
Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be found
to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect. In lieu of such
provision, there shall be added automatically as part of this Agreement, a
provision as similar in its terms to such provision as may be possible and be
legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
-----------------------------------
Its: Senior Vice President
-----------------------------------
/s/ Bruce A. Kanehl, D.D.S.
-----------------------------------
Bruce A. Kanehl, D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 [intentionally omitted]
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
ROGER ALLEN KAY, D.D.S., P.A.
and
ROGER A. KAY, D.D.S.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . 3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Section 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 12
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 12
Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 13
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 13
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 13
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 14
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 14
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS . . . . . . . . . . . . . 17
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 18
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 19
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 20
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . 21
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . 22
14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed
as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra"), ROGER ALLEN KAY, D.D.S., P.A., a Maine
professional association ("Contributor") and ROGER A. KAY, D.D.S.,
shareholder of Contributor (referred to herein as "Shareholder" or
"Shareholders").
WITNESSETH:
WHEREAS, Contributor operates a dental practice ("Business") and Pentegra
is engaged in the business of managing certain non-dentistry aspects of
dental practices;
WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra
desires to receive from Contributor, certain assets of Contributor;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Contributor, the "Target
Companies");
WHEREAS, it is intended for Federal income tax purposes that the
transfers contemplated by this Agreement, the Other Agreements and Pentegra's
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an
exchange within the meaning of Section 351 of the Internal Revenue Code of
1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and
conditions contained herein, on the Closing Date, Contributor shall convey,
transfer, deliver and assign to Pentegra or any affiliate of Pentegra
designated by Pentegra all of Contributor's right, title and interest in and
to those certain assets described on EXHIBIT 1.1 attached hereto
(individually, "Asset", and collectively "Assets"), free and clear of all
obligations, security interests, claims, liens and encumbrances, except as
specifically assumed, or taken subject to, by Pentegra pursuant to SECTION
1.3(b) hereof.
<PAGE>
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and contributed hereunder, and Contributor shall retain all of
its right, title and interest in and to, the assets not specifically
transferred hereunder, including without limitation, the assets described on
EXHIBIT 1.2 (the "Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Contributor
contained herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Contributor the consideration
specified in ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Contributor listed on EXHIBIT
1.3(b) attached hereto to the extent that such obligations, commitments,
liabilities and indebtedness are current and not otherwise in default. (the
"Assumed Liabilities"). Notwithstanding any contrary provision contained
herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra
assume: (i) any liability, commitment or obligation or trade payable or
indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability
set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of
or default under such contracts, leases, commitments or obligations which
occurred on or before the Closing Date; (iii) any liability for any employee
benefits payable to employees of Contributor, including, but not limited to,
liabilities arising under any Contributor Plan (as defined in SECTION 2.21
hereof); (iv) any liability based upon or arising out of a violation of any
antitrust or similar restraint-of-trade laws by any Shareholder or
Contributor, including, without limiting the generality of the foregoing, any
such antitrust liability which may arise in connection with agreements,
contracts, commitments or orders for the sale of goods or provision of
services by Contributor reflected on the books of Contributor at or prior to
the Closing Date; (v) any liability based upon or arising out of any tortious
or wrongful actions of Contributor, any licensed professional employee or
independent contractor of Contributor or any Shareholder, (vi) any liability
for the payment of any taxes of Contributor or any Shareholder, including
without limitation, sales, use and other transfer taxes and income taxes
arising from or by reason of the transactions contemplated by this Agreement;
(vii) any indebtedness secured by deeds of trust or mortgages on real
property; nor (viii) any liability incurred or to be incurred pursuant to any
malpractice or other suits or actions pending against Contributor or any
Shareholder.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement,
Contributor and Shareholders shall execute and deliver all such deeds, bills
of sale, assignments and assurances and take and do all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any
and all right, title and interest in, to and under the Assets in Pentegra or
otherwise to carry out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS.
Contributor and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Contributor is a professional
corporation or association, as applicable, duly organized, validly existing
and in good standing under the laws of the State of
<PAGE>
Maine. ontributor has all necessary corporate powers to own all of its
assets and to carry on its business as such business is now being conducted.
Contributor does not own stock in or control, directly or indirectly, any
other corporation, association or business organization, nor is Contributor a
party to any joint venture or partnership. The Shareholders are the sole
shareholders of Contributor and own all outstanding shares of capital stock
free of all security interests, claims, encumbrances and liens in the amounts
set forth on EXHIBIT 2.1. Each share of Contributor's common stock has been
legally and validly issued and fully paid and nonassessable. No shares of
capital stock of Contributor are owned by Contributor in treasury. There are
no outstanding (a) bonds, debentures, notes or other obligations the holders
of which have the right to vote with the stockholders of Contributor on any
matter, (b) securities of Contributor convertible into equity interests in
Contributor, or (c) commitments, options, rights or warrants to issue any
such equity interests in Contributor, to issue securities of Contributor
convertible into such equity interests, or to redeem any securities of
Contributor. No shares of capital stock of Contributor have been issued or
disposed of in violation of the preemptive rights, rights of first refusal or
similar rights of any of Contributor's stockholders. Contributor is not
required to qualify to do business as a foreign corporation in any other
state or jurisdiction by reason of its business, properties or activities in
or relating to such other state or jurisdiction. Contributor does not have
any assets, employees or offices in any state other than the state set forth
in the first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the corporate
power to execute, deliver and perform this Agreement and all agreements and
other documents executed and delivered by it pursuant to this Agreement or to
be executed and delivered on the Closing Date, and has taken all action
required by law, its Articles or Certificate of Incorporation, its Bylaws or
otherwise, to authorize the execution, delivery and performance of this
Agreement and such related documents. Each Shareholder has the legal
capacity to enter into and perform this Agreement and the other agreements to
be executed and delivered in connection herewith. Contributor has obtained
the approval of its stockholders necessary to the consummation of the
transactions contemplated herein. This Agreement and all agreements and
documents executed and delivered in connection herewith have been, or will be
as of the Closing Date, duly executed and delivered by Contributor and
Shareholders, as appropriate, and constitute or will constitute the legal,
valid and binding obligations of Contributor and Shareholders, enforceable
against Contributor and Shareholders in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally or the availability of
equitable remedies. The execution and delivery of this Agreement, and the
agreements executed and delivered pursuant to this Agreement or to be
executed and delivered on the Closing Date, do not, and, subject to the
receipt of consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, violate any provision of the Articles or
Certificate of Incorporation or Bylaws of Contributor or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or
decree to which Contributor or any Shareholder is a party or by which
Contributor or any Shareholder is bound, or violate any material restrictions
of any kind to which Contributor is subject, or result in any lien or
encumbrance on any of Contributor's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to
the knowledge of Contributor and Shareholders, threatened, which may result
in the revocation, cancellation or suspension, or any adverse modification,
of any such licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Contributor or
<PAGE>
Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been declared or paid by Contributor on any of its capital
stock since the Balance Sheet Date. No repurchase of any of Contributor's
capital stock has been approved, effected or is pending, or is contemplated
by Contributor.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Contributor and all
amendments thereto have been delivered to Pentegra. The minute books of
Contributor contain accurate minutes of all meetings of and consents to
actions taken without meetings of the Board of Directors and stockholders of
Contributor since its formation. The books of account of Contributor have
been kept accurately in the ordinary course of business and the revenues,
expenses, assets and liabilities of Contributor have been properly recorded
in such books.
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore
furnished Pentegra with copies of its unaudited balance sheet and related
unaudited statements of income, retained earnings and cash flows for its
prior two full fiscal years, as well as copies of its unaudited balance sheet
as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet"
and the latest date thereof shall be referred to as the "Balance Sheet Date")
and any related unaudited statements of income, retained earnings, schedule
of accounts receivable, accounts payable and accrued liabilities, and cash
flows for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Contributor as
of the dates and for the periods indicated and reflect all fixed and
contingent liabilities of Contributor.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Contributor or any Shareholder leases, as lessor or lessee,
real or personal property used in operating the Business, related to the
Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and
enforceable in accordance with their respective terms, and there is not under
any such lease any existing default by Contributor, as lessor or lessee, or
any condition or event of which any Shareholder or Contributor has knowledge
which with notice or lapse of time, or both, would constitute a default, in
respect of which Contributor or Shareholders have not taken adequate steps to
cure such default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Contributor and Shareholders have
no knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good, valid
and marketable title to all of the Assets, free and clear of any liens,
claims, charges, exceptions or encumbrances, except for those, if any, which
are set forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all
encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances
indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the
Closing Date and evidence of such releases of liens and claims shall be
provided to Pentegra on the Closing Date and the Assets shall not be used to
satisfy such liens, claims or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Contributor, are in good, current, standard and merchantable
condition and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Contributor has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all
<PAGE>
predecessor companies of Contributor, including the names of any entities
from whom Contributor previously acquired significant assets. Except for
off-the-shelf software licenses and except as set forth on EXHIBIT 2.12,
Contributor is not a licensee in respect of any patents, trademarks, service
marks, trade names, copyrights or applications therefor, or manufacturing
processes, formulas or trade secrets or similar items and no such licenses
are necessary for the conduct of the Business or the use of the Assets. No
claim is pending or has been made to the effect that the Assets or the
present or past operations of Contributor in connection with the Assets or
Business infringe upon or conflict with the asserted rights of others to any
patents, patent rights, manufacturing processes, trade names, trademarks,
service marks, inventions, licenses, specialized treatment protocols,
copyrights, formulas, know-how and trade secrets. Contributor has the sole
and exclusive right to use all Assets constituting proprietary rights without
infringing or violating the rights of any third parties and no consents of
any third parties are required for the use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the name of each director and officer of
Contributor and the offices held by each, (b) the most recent payroll report
of Contributor, showing all current employees of Contributor and their
current levels of compensation, (c) promised increases in compensation of
employees of Contributor that have not yet been effected, (d) oral or written
employment agreements, consulting agreements or independent contractor
agreements (and all amendments thereto) to which Contributor is a party,
copies of which have been delivered to Pentegra, and (e) all employee
manuals, materials, policies, procedures and work-related rules, copies of
which have been delivered to Pentegra. Contributor is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Contributor has not engaged in any unfair labor
practice. There are no unfair labor practices charges or complaints pending
or threatened against Contributor, and Contributor has never been a party to
any agreement with any union, labor organization or collective bargaining
unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Contributor nor the
Business nor any of the Assets is subject to any pending, nor does
Contributor or any Shareholder have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Contributor, any Shareholder, the Business, the
Assets or the transactions contemplated by this Agreement, and, to the
knowledge of Contributor and Shareholders, no basis for any such action
exists, nor is there any legal impediment of which Contributor or any
Shareholder has knowledge to the continued operation of its business or the
use of the Assets in the ordinary course, subject to consents set forth on
EXHIBIT 2.4.
2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Contributor ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted or may be made
by any party thereto. Except as indicated on such Exhibits, there is not
under any such Contract any existing default by Contributor or any
Shareholder, or any condition or event of which Contributor or any
Shareholder has knowledge which with notice or lapse of time, or both, would
constitute a default. Contributor and Shareholders have no knowledge of any
default by any other party to such Contracts. Contributor and Shareholders
have not received notice of the intention of any party to any Contract to
cancel or terminate any Contract and have no reason to believe that any
amendment or change to any Contract is contemplated by any party thereto.
Other than those contracts, obligations and commitments listed on EXHIBIT
2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Contributor are not a party to any
material written or oral agreement contract, lease or arrangement, including
without limitation, any:
(a) Contract related to the Assets other than this Agreement;
<PAGE>
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
the Contributor or Shareholders, oral or written, that provide for
prepayments or deferred installment payments; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Contributor on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16,
Contributor has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(d) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Contributor since the Balance
Sheet Date;
<PAGE>
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(j) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties,
assets or business or the Business or the Assets, or experienced any other
material adverse change in its financial condition, assets, prospects,
liabilities or business;
(n) Declared or paid a distribution, payment or dividend of any
kind on the capital stock of Contributor;
(o) Repurchased, approved any repurchase or agreed to repurchase
any of Contributor's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Contributor has filed all tax returns (including tax
reports and other statements) required to have been filed by it, and has paid
all taxes (including any interest, penalty or additions thereto) required to
have been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Contributor has not received any notice that any tax deficiency
or delinquency has been or may be asserted against Contributor. There are
no audits relating to taxes of Contributor pending or in process or, to the
knowledge of Contributor, threatened. Contributor is not currently the
beneficiary of any waiver of any statute of limitations in respect of taxes
nor of any extension of time within which to file any tax return or to pay
any tax assessment or deficiency. There are no liens or encumbrances
relating to taxes on or threatened against any of the assets of Contributor.
Contributor has withheld and paid all taxes required by law to have been
withheld and paid by it. Neither Contributor nor any predecessor of
Contributor is or has been a party to any tax allocation or sharing agreement
or a member of an affiliated group of corporations filing a consolidated
Federal income tax return. Contributor has delivered to Pentegra correct and
complete copies of Contributor's three most recently filed annual state,
local and Federal income tax returns, together with all examination reports
and statements of deficiencies assessed against or agreed to by Contributor
during the three calendar year period preceding the date of this Agreement.
Contributor has neither made any payments, is obligated to make any payments,
or is a party to any agreement that under any circumstance could obligate it
to make any payments that will not be deductible under Code section 280G.
<PAGE>
(b) Contributor does not intend to dispose of any of the shares of
Pentegra Common Stock to be received hereunder and is not a party to any
plan, arrangement or agreement for the disposition of such shares.
Contributor and Shareholders have no knowledge, after due inquiry, of any
such intent, plan, arrangement or agreement by any Shareholder. Nothing
contained herein shall prohibit Contributor from selling such shares of
Pentegra Common Stock after the designated holding period and in accordance
with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated
by this Agreement which may be now or hereafter asserted against Pentegra,
Contributor or Contributor's shareholders resulting from any action taken by
Contributor or any Shareholder or their respective agents or employees, or
any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Contributor did not have, as of the Balance
Sheet Date, and has not incurred since that date and will not have incurred
as of the Closing Date, any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
other than those incurred in the ordinary course of business or as set forth
on EXHIBIT 2.16. Contributor and Shareholders do not know, or have
reasonable grounds to know, of any basis for the assertion against
Contributor or any Shareholder as of the Balance Sheet Date, of any claim or
liability of any nature in any amount not fully reflected or reserved against
on the Balance Sheet, or of any claim or liability of any nature arising
since that date other than those incurred in the ordinary course of business
or contemplated by this Agreement. All indebtedness of Contributor
(including without limitation, indebtedness for borrowed money, guaranties
and capital lease obligations) is described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Contributor, each Shareholder and each licensed
professional of Contributor carries property, liability, malpractice,
workers' compensation and such other types of insurance as is customary in
the industry. Valid and enforceable policies in such amounts are outstanding
and duly in force and will remain duly in force through the Closing Date.
All such policies are described in EXHIBIT 2.20 attached hereto and true and
correct copies have been delivered to Pentegra. Neither Shareholders nor
Contributor have not received notice or other communication from the issuer
of any such insurance policy cancelling or amending such policy or
threatening to do so. Neither Contributor, nor any Shareholder nor any
licensed professional employee of Contributor has any outstanding claims,
settlements or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Contributor has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Contributor
Plan," and collectively "Contributor Plans") have been operated and
administered in all material respects in accordance with all applicable laws,
rules and regulations, including without limitation, ERISA, the Internal
Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964,
as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in
Employment Act of 1967, as amended, and the related rules and regulations
adopted by those Federal agencies responsible for the administration of such
laws. No act or failure to act by Contributor has resulted in a "prohibited
transaction" (as defined in ERISA) with respect to the Contributor Plans. No
"reportable event" (as defined in ERISA) has occurred with respect to any of
the Contributor Plans. Contributor has not previously made, is not currently
making, and is not obligated in any way to make, any contributions to any
multiemployer plan within the meaning of the Multi-Employer Pension Plan
Amendments Act of 1980. With respect to each Contributor Plan, either (i)
the value of plan assets
<PAGE>
(including commitments under insurance contracts) is at least equal to the
value of plan liabilities or (ii) the value of plan liabilities in excess of
plan assets is disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Contributor, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Shareholders and
Contributor's licensed professional employees, and the conduct of the
Business and use of the Assets, have complied with all applicable laws,
rules, regulations and licensing requirements, including, without limitation,
the Federal Environmental Protection Act, the Occupational Safety and Health
Act, the Americans with Disabilities Act and any environmental laws and
medical waste laws, and there exist no violations by Contributor, any
Shareholder or any licensed professional employee of Contributor of any
Federal, state or local law or regulation. Contributor and Shareholders have
not received any notice of a violation of any Federal, state and local laws,
regulations and ordinances relating to the operations of the Business and
Assets and no notice of any pending inspection or violation of any such law,
regulation or ordinance has been received by Contributor.
2.24 THIRD PARTY PAYORS. Contributor, Shareholders and each licensed
professional employee or independent contractor of Contributor has timely
filed all claims or other reports required to be filed with respect to the
purchase of services by third-party payors, and all such claims or reports
are complete and accurate, and has no liability to any payor with respect
thereto. There are no pending appeals, overpayment determinations,
adjustments, challenges, audit, litigation or notices of intent to open
Medicare or Medicaid claim determinations or other reports required to be
filed by Contributor, any Shareholder and each licensed professional employee
of Contributor. Neither Contributor, nor any Shareholder, nor any licensed
professional employee of Contributor has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Contributor, Shareholders and Contributor's licensed professional employees
has not (a) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made
any false statement or representation of a material fact for use in
determining rights to any benefit or payment; (c) failed to disclose
knowledge of the occurrence of any event affecting the initial or continued
right to any benefit or payment on its own behalf or on behalf of another,
with the intent to fraudulently secure such benefit or payment; and (d)
violated any applicable state anti-remuneration or self-referral statutes,
rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Contributor or Shareholders in this Agreement, and no Exhibit or certificate
issued or executed by, or information furnished by, officers or directors of
Contributor or any Shareholder and furnished or to be furnished to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Contributor has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director
<PAGE>
or stockholder of Contributor, or their respective spouses, children or
affiliates, owns directly or indirectly, on an individual or joint basis, any
interest in, has a compensation or other financial arrangement with, or
serves as an officer or director of, any customer or supplier or competitor
of Contributor or any organization that has a material contract or
arrangement with Contributor.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Contributor's services which
accounted for more than 10% of revenues of Contributor in the preceding
fiscal year. Contributor has good relations with all such payors and other
material payors of Contributor and none of such payors has notified
Contributor that it intends to discontinue its relationship with Contributor
or to deny any claims submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Contributor and Shareholders
as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would
not have a material adverse effect, there are no proceedings pending or, to
the knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has
<PAGE>
knowledge to the continued operation of its business or the use of its Assets
in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Contributor or
any Shareholder pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
SECTION 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS.
Contributor and Shareholders, jointly and severally, agree that between
the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Shareholders
shall use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions.
Contributor and Shareholders agree to complete the Exhibits hereto to be
provided by them in form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Contributor and Shareholders shall operate the
Business and use the Assets in the ordinary course. Contributor and
Shareholders shall not enter into any lease, contract, indebtedness,
commitment, purchase or sale or acquire or dispose of any capital asset
relating to the Business or the Assets except in the ordinary course of
business. Contributor and Shareholders shall use their best efforts to
preserve the Business and Assets intact and shall not take any action that
would have an adverse effect on the Business or Assets. Contributor and
Shareholders shall use their best efforts to preserve intact the
relationships with payors, customers, suppliers, patients and others having
significant business relations with Contributor. Contributor and Shareholders
shall collect its receivables and pay its trade payables in the ordinary
course of business. Contributor and Shareholdes shall not introduce any new
method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Contributor and Shareholders shall permit
Pentegra and its authorized representatives access to, and make available for
inspection, all of the assets and business of Contributor, the Business and
the Assets, including employees, customers and suppliers and permit Pentegra
and its authorized
<PAGE>
representatives to inspect and make copies of all documents, records and
information with respect to the business or assets of Contributor, the
Business or the Assets as Pentegra or its representatives may request.
Contributor and Shareholders shall promptly notify Pentegra in writing of (a)
any notice or communication relating to a default or event that, with notice
or lapse of time or both, could become a default, under any contract,
commitment or obligation to which Contributor is a party or relating to the
Business or the Assets, and (b) any adverse change in Contributor's or the
Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor
and Shareholders shall use their best efforts to secure all necessary
approvals and consents of third parties to the consummation of the
transactions contemplated hereby, including consents described on EXHIBIT
2.4. Contributor and Shareholders shall use their best efforts to obtain all
licenses, permits, approvals or other authorizations required under any law,
rule, regulation, or otherwise to provide the services of Contributor
contemplated by the Service Agreement and to conduct the intended business of
Contributor and operate the Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance
with the provisions hereof, Contributor and Shareholders shall not, and shall
use its best efforts to cause Contributor's employees, agents and
representatives not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer, including without limitation, any proposal or offer to any
Shareholder, with respect to a merger, acquisition, consolidation or similar
transaction involving, or the purchase of all or any significant portion of
the assets or any equity securities of Contributor or engage in any
negotiations concerning, or provide any confidential information or data to,
or have any discussions with, any person relating to such proposal or offer,
and Contributor and Shareholders will immediately cease any such activities,
discussions or negotiations heretofore conducted with respect to any of the
foregoing. Contributor and Shareholders shall immediately notify Pentegra if
any such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby covenants
and agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Contributor or any entity might have any liability
whatsoever arising from any insurance, pension plan, employment tax or
similar liability of Contributor to any employee or other person or entity
(including, without limitation, any Contributor Plan and any liability under
employment contracts with Contributor) allocable to services performed prior
to the Closing Date. Contributor and Shareholders acknowledge that the
purpose and intent of this covenant is to assure that Pentegra shall have no
unfunded liability whatsoever at any time after the Closing Date with respect
to any of Contributor's employees or similar persons or entities, including,
without limitation, any Contributor Plan for the period prior to the Closing
Date.
4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash
compensation of any Shareholder (other than in the ordinary course of
business) or other employee or an independent contractor of Contributor,
adopt, amend or terminate any compensation plan, employment agreement,
independent contractor agreement, employee policies and procedures or
employee benefit plan, take any action that could deplete the assets of any
employee benefit, or fail to pay any premium or contribution due or file any
report with respect to any employee benefit plan, or take any other actions
with respect to its employees or employee matters which might have an adverse
effect upon Contributor, its business, assets or prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Contributor, nor will any repurchase
of any of Contributor's capital stock be approved or effected.
<PAGE>
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Shareholders
shall use their best efforts to take, or cause to be taken, all actions
necessary to effect the acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Contributor and Shareholders will not
change in any material respect the tax or financial accounting methods or
practices followed by Contributor (including any material change in any
assumption underlying, or any method of calculating, any bad debt,
contingency or other reserve), except as may be required by law or generally
accepted accounting principles. Contributor and Shareholders will duly,
accurately and timely (without regard to any extensions of time) file all
returns, information statements and other documents relating to taxes of
Contributor required to be filed by it, and pay all taxes required to be paid
by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Contributor hereby waive any compliance with the applicable state Bulk
Transfers Act, if any. Contributor and Shareholders covenant and agree that
all of the creditors with respect to the Business and the Assets will be paid
in full by Contributor prior to the Closing Date, except to extent that any
liability to such creditors is assumed by Pentegra pursuant to this
Agreement. If required by Pentegra, Contributor and Shareholders shall
furnish Pentegra with proof of payment of all creditors with respect to the
Business and the Assets. Notwithstanding the foregoing, Contributor and
Shareholders may dispute the validity or amount of any such creditor's claim
without being deemed to be in violation of this SECTION 4.11, provided that
such dispute is in good faith and does not unreasonably delay the resolution
of the claim and provided, further that Contributor and Shareholders agree to
indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Contributor leases any of its premises from any
Shareholder or other affiliate of Contributor or any shareholder of
Contributor, Pentegra shall have entered into a building lease (the "Building
Lease") with the owner of such premises on terms and conditions satisfactory
to Pentegra, the terms and conditions of which shall include, without
limitation, (i) a five year initial term plus three five-year renewal
options, (ii) a lease rate equal to the fair market value lease rate, as
agreed to by Pentegra, and (iii) such other provisions to be acceptable to
Pentegra.
4.13 HIRING OF EMPLOYEES. Contributor and Shareholders shall cooperate
with all requests made by Pentegra for the purpose of allowing Pentegra to
hire those non-dental employees of Contributor designated by Pentegra, such
employment to be effective as of the Closing Date. Notwithstanding the
above, Contributor and Shareholders shall remain liable under any Contributor
Plans for any claims incurred by any employees or their spouses or
dependents, and for all compensation, bonuses, benefits and other such items
and other liabilities related to Contributor's employees incurred by
Contributor prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges that
all employees of Contributor hired by Pentegra pursuant to SECTION 4.13
above, shall be treated as "leased employees" (as defined in Code Section
414(n)) of Contributor and shall be treated as Clinic employees for purposes
of eligibility and participation in Contributor Plans.
4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates to
be named as an additional insured on its liability insurance programs,
effective as of the Closing Date.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions.
<PAGE>
Pentegra agrees to complete the Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS.
Pentegra, Shareholders and Contributor agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Contributor and Shareholders
shall cooperate to promptly prepare and file with the Securities Exchange
Commission ("SEC") the Registration Statement on Form S-1 (or other
appropriate Form) to be filed by Pentegra in connection with its Initial
Public Offering (including the prospectus constituting a part thereof, the
"Registration Statement"). Pentegra shall obtain all necessary state
securities laws or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement and the Contributor and
Shareholders shall furnish all information concerning Contributor and
Shareholders as may be reasonable requested in connection with any such
action.
Contributor and Shareholder represent and warrant that none of the
information or documents supplied or to be supplied by it specifically for
inclusion in the Registration Statement, by exhibit or otherwise, will, at
the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act of 1933, 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, in
light of the circumstances under which they were made, not misleading.
Contributor and Shareholders shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.
Contributor and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by
Pentegra in connection with the preparation of the Registration Statement and
each amendment or supplement thereto, or any other statement, filing, notice
or application made by or on behalf of each such party or any of its
subsidiaries to any governmental entity in connection with the transactions
contemplated by the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Contributor and Shareholders contained herein shall have been true and
correct in all respects when initially made and shall be true and correct in
all respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Contributor and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Contributor and Shareholders
prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
<PAGE>
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Contributor shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Contributor, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and Pentegra shall
have executed and delivered a Service Agreement (the "Service Agreement"), in
substantially the form attached hereto as EXHIBIT 7.7, pursuant to which
Pentegra will provide management services to the Contributor. Each Shareholder
shall have executed and delivered a Guaranty Agreement in substantially the form
attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder
shall, among other things, guaranty the obligations of Contributor under the
Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated, and
caused each shareholder of Contributor that has an existing employment agreement
with Contributor to have terminated his or her employment agreement with
Contributor and shall have executed an employment agreement ("Employment
Agreement") with Contributor in form and substance attached hereto as EXHIBIT
7.8 and otherwise satisfactory to Contributor and Pentegra.
7.9 CONSENTS AND APPROVALS. Contributor and Shareholders shall have
obtained all necessary government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly
executed in form satisfactory to Pentegra and its counsel, referred to in
SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or
payables between Contributor and its shareholders or affiliates and Contributor
shall not have any liabilities, including indebtedness, guaranties and capital
leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Contributor and Shareholders shall have named Pentegra as
an additional insured on their liability insurance program in accordance with
SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Contributor since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
<PAGE>
The obligations of Contributor and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Pentegra contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Contributor shall have received all documents,
duly executed in form satisfactory to Contributor and its counsel, referred to
in SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. Within five business days
after requested by Pentegra, Contributor and Shareholders shall deliver to
Pentegra the following, all of which shall be in a form satisfactory to counsel
to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra)
in escrow pending Closing, pursuant to an escrow agreement or letter agreement
in form and substance mutually acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals of
all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of
Contributor authorizing the execution, delivery and performance of this
Agreement, the Service Agreement, the Employment Agreements and all related
documents and agreements each certified by the Secretary as being true and
correct copies of the original thereof;
(d) a bill of sale conveying the Assets to Pentegra;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
<PAGE>
(f) certificates of the Shareholders and a duly authorized officer of
Contributor dated as of the Closing Date, (i) as to the truth and correctness of
the representations and warranties of Contributor and Shareholder contained
herein; (ii) as to the performance of and compliance by Contributor and
Shareholder with all covenants contained herein; and (iii) certifying that all
conditions precedent of Contributor and Shareholders to the Closing have been
satisfied;
(g) a certificate of the Secretary of Contributor certifying as to
the incumbency of the directors and officers of Contributor and as to the
signatures of such directors and officers who have executed documents delivered
at the Closing on behalf of Contributor;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Contributor and any state of required
foreign qualification of Contributor establishing that Contributor is in
existence and is in good standing to transact business in its state of
incorporation;
(i) an opinion of counsel to Contributor and Shareholder opining as
to the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Contributor, the enforceability of this Agreement and the other agreements and
documents to be executed in connection herewith, and other matters reasonably
requested by Pentegra;
(j) non-foreign affidavits executed by Contributor;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Contributor, in substantially the form attached hereto as EXHIBIT 9.1(L) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall
deliver to Contributor and Shareholder, the following, all of which shall be in
a form satisfactory to counsel to Contributor and Shareholders and shall be held
by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing,
pursuant to an escrow agreement or letter agreement in form and substance
mutually acceptable to the parties hereto:
(a) the Acquisition Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance of
this Agreement and all related documents and agreements each certified by the
Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii) certifying
that all conditions
<PAGE>
precedent of Pentegra to the Closing have been satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and the
State of incorporation of Contributor;
(h) an opinion of counsel to Pentegra opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Pentegra, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Contributor;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Contributor to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in
any Exhibit attached hereto, any agreement executed pursuant hereto, and any
certificate executed and delivered by any party pursuant to the terms of this
Agreement, shall constitute representations and warranties of Contributor and
Shareholders, jointly and severally, or of Pentegra, as the case may be. All
such representations and warranties, and all representations and warranties
expressly labeled as such in this Agreement shall survive the date of this
Agreement and the Closing Date for a period of five (5) years following the
Closing Date, except that (i) the representations and warranties with respect to
environmental and medical waste laws and health care laws and matters shall
survive for a period of fifteen (15) years and tax representations shall survive
until one year after the expiration of the applicable statute of limitations.
Each party covenants with the other parties not to make any claim with respect
to such representations and warranties, against any party after the date on
which such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless
such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4
hereof, as the case may be. Each party hereby releases, acquits and discharges
the other party from any and all claims and demands, actions and causes of
action, damages, costs, expenses and rights of setoff with respect to which the
notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely
provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD CONTRIBUTOR AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING CONTRIBUTOR AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"),
HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS,
SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO,
REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY
REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY,
<PAGE>
AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE
FURNISHED BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY
PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF,
OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. CONTRIBUTOR AND
SHAREHOLDERS (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD
PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND
EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS
SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED
PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS,
DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT
LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING
FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY,
AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE
EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER
INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER,
AND
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS WHETHER
ON OR AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY CONTRIBUTOR OR ITS SHAREHOLDERS OR THEIR
CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES
OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR
ANY
<PAGE>
OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE
CONTRIBUTOR OR SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY
PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF CONTRIBUTOR OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY
RELATED TO OR AFFILIATED WITH THE CONTRIBUTOR OR SHAREHOLDER ARISING FROM OR AS
A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF CONTRIBUTOR OR THE SHAREHOLDERS FOR COSTS AND
EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION
WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(B), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS AND
PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE CONTRIBUTOR OR ITS SHAREHOLDERS
SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION
STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR
SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED
OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS
SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the defense
of such action or proceeding, such Indemnified Person shall notify Indemnitor
thereof. If any such action or other proceeding shall be brought against any
Indemnified Person, Indemnitor shall, upon written notice given within a
reasonable time following receipt by Indemnitor of such notice from Indemnified
Person, be entitled to assume the defense of such action or proceeding with
counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person;
provided, however, that any Indemnified Person may at its own expense retain
separate counsel to participate in such defense. Notwithstanding the foregoing,
Indemnified Person shall have the right to employ separate counsel at
Indemnitor's expense and to control its own defense of such action or proceeding
if, in the reasonable opinion of counsel to such Indemnified Person, (a) there
are or may be legal defenses available to such Indemnified Person or to other
Indemnified Persons that are different from or additional to those available to
Indemnitor and which could not be adequately advanced by counsel chosen by
Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor
and such Indemnified Person that would make such separate representation
advisable; provided, however, that in no event shall Indemnitor
<PAGE>
be required to pay fees and expenses hereunder for more than one firm of
attorneys of Indemnified Person in any jurisdiction in any one action or
proceeding or group of related actions or proceedings. Indemnitor shall not,
without the prior written consent of any Indemnified Person, settle or
compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding to which such Indemnified Person is a
party unless such settlement, compromise or consent includes an unconditional
release of such Indemnified Person from all liability arising or potentially
arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Contributor or any Shareholder giving
rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra
shall be entitled to offset the amount of damages incurred by it as a result of
such breach of warranty, representation, covenant or agreement against any
amounts payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of
Contributor or Shareholder contained in this Agreement or in any certificate or
other document executed and delivered by Contributor or any Shareholder pursuant
to this Agreement is or becomes untrue or breached in any material respect or if
Contributor or any Shareholder fails to comply in any material respect with any
covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
(c) at any time by Contributor or any Shareholder if any representation or
warranty of Pentegra contained in this Agreement or in any certificate or other
document executed and delivered by Pentegra pursuant to this Agreement is or
becomes untrue or breached in any material respect or if Pentegra fails to
comply in any material respect with any covenant or agreement contained herein
and such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra, Shareholders or Contributor if the transaction
contemplated hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Contributor, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date,
Contributor shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of
Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer shall
be treated as effective for any purpose or (b) engage in any transaction,
whether or not with respect to any shares of Pentegra Common Stock or any
interest therein, the intent or effect of which is to reduce the risk of owning
shares of Pentegra Common Stock. The certificates evidencing the Pentegra
Common Stock delivered to Contributor pursuant to the terms hereof will bear a
legend substantially in the form set forth below and containing such other
information as Pentegra may deem necessary or appropriate:
<PAGE>
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Shareholders
acknowledge that the shares of Pentegra Common Stock to be delivered to
Contributor pursuant to this Agreement have not been and will not be registered
under the Securities Act of 1933 and may not be resold without compliance with
the Securities Act of 1933. The Pentegra Common Stock to be acquired by
Contributor pursuant to this Agreement is being acquired solely for its own
account, for investment purposes only and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution. Contributor covenants, warrants and represents that none of the
shares of Pentegra Common Stock issued to it will be offered, sold, assigned,
pledged, hypothecated, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the Securities Act, as
amended, and the rules and regulations of the Securities Exchange Commission and
applicable state securities laws and regulations. All certificates evidencing
shares of Pentegra Common Stock shall bear the following legend in addition to
the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Contributor resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Shareholders are able
to bear the economic risk of an investment in Pentegra Common Stock acquired
pursuant to this Agreement and can afford to sustain a total loss of such
investment and have such knowledge and experience in financial and business
matters that they are capable of evaluating the merits and risks of the proposed
investment and therefore have the capacity to protect their own interests in
connection with the acquisition of the Pentegra Common Stock. Contributor,
Shareholders and their representatives have had an adequate opportunity to ask
questions and receive answers from the officers of Pentegra concerning any and
all matters relating to the background and experience of the officers and
directors of Pentegra, the plans for the operations of the business of Pentegra,
and any plans for additional acquisitions and the like. Contributor,
Shareholders and their representatives have asked any and all questions in the
nature described in the preceding sentence and all questions have been answered
to their satisfaction. Contributor and Shareholders are "accredited investors"
as defined in Regulation D of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Contributor and Shareholders agree that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally through
no fault of Contributor or Shareholders, (ii) disclosure is required by law or
the order of any governmental authority under color of law, provided, that prior
to disclosing any information pursuant to this clause (ii), Contributor and
Shareholders shall, if possible, give prior written notice thereof to the other
parties hereto, and provide such other parties hereto with the
<PAGE>
opportunity to contest such disclosure, (iii) Contributor and Shareholders
reasonably believe that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party, or (iv) Contributor and
Shareholders are the sole and exclusive owner of such confidential
information as a result of the transactions contemplated hereunder or
otherwise. In the event of a breach or threatened breach by Contributor or
Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled
to an injunction restraining Contributor and Shareholders from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting Pentegra from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages. The
obligations of the parties under this SECTION 13 shall survive the
termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement, together with the transactions contemplated by the Other
Agreement and the Initial Public Offering, will qualify as an exchange meeting
the requirements of Section 351 of the Code. The tax returns (and schedules
thereto) of Shareholders, Contributor and Pentegra shall be filed in a manner
consistent with such intention and Contributor and Pentegra shall each provide
the other with such tax information, reports, returns or schedules as may be
reasonably required to assist the other in so reporting the transactions
contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery, or by
facsimile AND overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Contributor or Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
<PAGE>
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this Agreement,
whether or not such transactions are consummated. Without limiting the
generality of the foregoing and whether or not such liabilities may be deemed to
have been incurred in the ordinary course of business, Pentegra shall not be
liable to or required to pay, either directly or indirectly, any fees and
expenses of legal counsel, accountants, auditors or other persons or entities
retained by Contributor or any Shareholder for services rendered in connection
with negotiating and closing the transactions contemplated by this Agreement or
the documents to be executed in connection herewith, whether or not such costs
or expenses are incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure, either
written or oral, regarding the transactions contemplated by this Agreement
without the prior written consent of the other party, provided that the
foregoing shall not prohibit any disclosure (a) by press release, filing or
otherwise that Pentegra has determined in good faith judgment to be required by
Federal securities laws or the rules of the National Association of Securities
Dealers, (b) to attorneys, accountants, investment bankers or other agents of
the parties assisting the parties in connection with the transactions
contemplated by this Agreement, and (c) by Pentegra in connection with the
conduct of its Initial Public Offering and conducting an examination of the
operations and assets of Contributor.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF
CONTRIBUTOR AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS
PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are
integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and not
only in connection with the specific representation in which they are explicitly
referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS
ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY
AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR
ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one and the same
instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the
<PAGE>
benefit of, the parties hereto, and their respective successors and assigns,
and no other person shall acquire or have any right under or by virtue of
this Agreement. No party may assign any right or obligation hereunder
without the prior written consent of the other parties; provided, however,
that Pentegra may assign its rights and delegate its obligations hereunder to
any entity that is an affiliate of Pentegra. For purposes of this Agreement
an "affiliate" of Pentegra shall include any entity that, through one or more
intermediaries is, controlled, controlled by or under common control with,
Pentegra. Upon any such assignment prior to the Closing, all references
herein to Pentegra (including those to Pentegra Common Stock) shall be deemed
to include references to the assignee and the assignee's common stock.
Notwithstanding any such assignment, Pentegra shall not, absent a written
release from Contributor, be relieved from its obligations to Contributor
under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand,
or Contributor, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Contributor and Pentegra as of the Closing Date, and the
prorated amount due Pentegra shall be credited to the cash portion of the
Purchase Consideration. Upon payment by Pentegra of such taxes actually
assessed and paid on the Assets, Pentegra shall calculate the apportionment
of such taxes and shall pay Contributor or may demand from Contributor, and
Contributor agrees to pay, the amount necessary to correct the estimate and
proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Contributors or Shareholders (hereinafter referred to as a "Party"), whether
made before or after the institution of any legal proceeding, any dispute
among the parties hereto in any way arising out of, related to, or in
connection with this Agreement (hereinafter a "Dispute"), shall be resolved
by binding arbitration in accordance with the terms of this Section
(hereinafter the "Arbitration Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in accordance
with the terms of this Arbitration Program, the Commercial Arbitration Rules of
the AAA. In the event of any inconsistency between this Arbitration Program and
those rules or statutes, then the terms of this Arbitration Program shall
control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been completed
and the arbitrators have determined each party's post-arbitration obligations
and responsibilities as it relates to such warranties and covenants. No
provision of, nor the exercise of any rights under, this Arbitration Program
shall limit the right of any Party at any time to seek or use ancillary or
preliminary judicial or non-judicial self help remedies for the purposes of
obtaining, perfecting, preserving, or foreclosing upon any personal property in
which there has been granted a security interest or lien by a Party in the
Documents. In Disputes involving indebtedness or other monetary obligations,
each Party agrees that the other Party may proceed against all liable persons,
jointly and severally against one or more of them, without impairing rights
against other liable persons. Nor shall a Party be required to join the
principal obligor or any other liable
<PAGE>
persons (e.g., sureties or guarantors) in any proceeding against a particular
person. A Party may release or settle with one or more liable persons as the
Party deems fit without releasing or impairing rights to proceed against any
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing, of
that Party's desire to arbitrate a dispute; and each Party shall, within twenty
(20) days from the date such notification is received, select an arbitrator, and
those two arbitrators shall select a third arbitrator within ten (10) days
thereafter. The issues or claims in dispute shall be committed to writing,
separately stated and numbered, and each party's proposed answers or contentions
shall be signed below the questions. Failure by a party to select an arbitrator
within the prescribed time period shall serve as that Party's acquiescence and
acceptance of the other party's selection of arbitrator. The arbitrators shall
resolve all Disputes in accordance with the applicable substantive law. Any
Dispute shall be decided by a majority vote of three arbitrators, unless the
claim or amount in controversy does not exceed $100,000.00, in which case a
single arbitrator (who shall have authority to render a maximum award of
$100,000.00, including all damages of any kind, costs and fees) may decide the
Dispute. The arbitrators may grant any remedy or relief that the arbitrators
deem just and equitable and within the scope of this Arbitration Program. The
arbitrators may also grant such ancillary relief as is necessary to make
effective the award. In all arbitration proceedings the arbitrators shall make
specific and written findings of fact and conclusions of law. In all
arbitration proceedings in which the amount in controversy exceeds $100,000.00,
in the aggregate, the Parties shall have in addition to the statutory right to
seek vacation or modification of any award pursuant to applicable law, the right
to seek vacation or modification of any award that is based in whole, or in
part, on an incorrect or erroneous ruling of law by appeal to an appropriate
court having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must be
filed in a court having jurisdiction over the Dispute within 15 days from the
date the award in rendered. The arbitrators' findings of fact shall be binding
on all Parties and shall not be subject to further review except as otherwise
allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in writing
by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the
headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this
Arbitration Program shall survive any termination, amendment, or expiration of
the Documents, unless the Parties otherwise expressly agree in writing making
specific reference to this Arbitration Program. To the extent permitted by
applicable law, the arbitrator shall have the power to award recovery of all
costs and fees (including attorney's fees, administrative fees, and arbitrators'
fees) to the prevailing Party. This Arbitration Program may be amended,
changed, or modified only by a writing which specifically refers to this
Arbitration Program and which is signed by all the Parties. If any term,
covenant, condition or provision of the Arbitration Program is found to be
unlawful or invalid or unenforceable, such illegality or invalidity or
unenforceable shall not affect the legality, validity or enforceability of the
remaining parts of this Arbitration Program, and all such remaining parts hereof
shall be valid and enforceable and have full force and effect as if the illegal,
invalid or unenforceable part had not been included. Each Party agrees to keep
all Disputes and arbitration proceedings strictly confidential, except for
disclosures of information required in the ordinary course of business of the
Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be found to
be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
ROGER ALLEN KAY, D.D.S., P.A.
By: /s/ Roger A. Kay, D.D.S.
--------------------------------
Roger A. Kay, DDS, President
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
--------------------------------
Its: Senior VP
-------------------------------
/s/ Roger A. Kay, D.D.S.
-----------------------------------
Roger A. Kay, DDS
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment
Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
PATRICK T. KELLY, D.D.S., P.C.
and
PATRICK T. KELLY, D.D.S.
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. TERMS OF THE REORGANIZATION
1.2 MERGER.............................................................. 1
1.3 CERTIFICATE OF INCORPORATION; BYLAWS................................ 2
1.7 SUBSEQUENT ACTIONS.................................................. 2
Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING.................................. 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS................................ 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS .................. 3
2.4 CONSENTS............................................................ 3
2.5 DISTRIBUTIONS AND REPURCHASES ...................................... 3
2.6 CORPORATE RECORDS .................................................. 3
2.7 COMPANY'S FINANCIAL INFORMATION .................................... 4
2.8 LEASES.............................................................. 4
2.9 CONDITION OF ASSETS ................................................ 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY .............................. 4
2.11 INVENTORIES ........................................................ 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES ................................ 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES.............. 4
2.14 LEGAL PROCEEDINGS .................................................. 5
2.15 CONTRACTS .......................................................... 5
2.16 SUBSEQUENT EVENTS .................................................. 6
2.17 TAXES .............................................................. 7
2.18 COMMISSIONS AND FEES................................................ 7
2.19 LIABILITIES; DEBT .................................................. 7
2.20 INSURANCE POLICIES.................................................. 7
2.21 EMPLOYEE BENEFIT PLANS.............................................. 7
2.22 ADVERSE AGREEMENTS.................................................. 8
2.23 COMPLIANCE WITH LAWS IN GENERAL .................................... 8
2.24 THIRD PARTY PAYORS.................................................. 8
2.25 NO UNTRUE REPRESENTATIONS .......................................... 8
2.26 BANKING RELATIONS .................................................. 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS.............. 9
2.28 PAYORS.............................................................. 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING.................................. 9
3.2 POWER AND AUTHORITY; CONSENTS ...................................... 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS .................. 9
3.4 LEGAL PROCEEDINGS .................................................. 9
3.5 TAXES .............................................................. 10
3.6 COMMISSIONS AND FEES................................................ 10
3.7 CAPITAL STOCK ...................................................... 10
3.8 NO UNTRUE REPRESENTATIONS .......................................... 10
<PAGE>
Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS ................................ 10
4.2 BUSINESS OPERATIONS ................................................ 10
4.3 ACCESS AND NOTICE .................................................. 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS ................ 10
4.5 ACQUISITION PROPOSALS .............................................. 11
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS................................ 11
4.7 EMPLOYEE MATTERS.................................................... 11
4.8 DISTRIBUTIONS AND REPURCHASES ...................................... 11
4.9 REQUIREMENTS TO EFFECT REORGANIZATION .............................. 11
4.10 ACCOUNTING AND TAX MATTERS.......................................... 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE.................................. 11
4.12 LEASE .............................................................. 12
4.13 HIRING OF EMPLOYEES ................................................ 12
4.14 EMPLOYEE BENEFIT PLANS.............................................. 12
4.15 INSURANCE .......................................................... 12
4.17 CORPORATE RECORDS .................................................. 12
4.18 POWER AND AUTHORITY FOR TRANSACTIONS................................ 12
4.19 NO BUSINESS ........................................................ 13
4.20 COMPLIANCE WITH LAWS................................................ 13
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS ................................ 13
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS ................ 13
Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS.............................................. 13
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES...................................... 14
7.2 COVENANTS AND CONDITIONS............................................ 14
7.3 PROCEEDINGS ........................................................ 14
7.4 NO MATERIAL ADVERSE CHANGE.......................................... 14
7.5 DUE DILIGENCE REVIEW................................................ 14
7.6 APPROVAL BY THE BOARD OF DIRECTORS.................................. 14
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT .............................. 14
7.8 EMPLOYMENT ARRANGEMENTS ............................................ 14
7.9 CONSENTS AND APPROVALS.............................................. 14
7.10 CLOSING DELIVERIES.................................................. 14
7.11 DEBT AND RECEIVABLES................................................ 14
7.12 INSURANCE .......................................................... 14
7.13 NO CHANGE IN WORKING CAPITAL........................................ 15
7.14 SECURITIES APPROVAL ................................................ 15
Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES...................................... 15
8.2 COVENANTS AND CONDITIONS............................................ 15
8.3 PROCEEDINGS ........................................................ 15
8.4 CLOSING DELIVERIES.................................................. 15
8.5 SECURITIES APPROVAL ................................................ 15
<PAGE>
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS.............................. 15
9.2 DELIVERIES OF PENTEGRA.............................................. 16
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL ................................................ 17
10.2 INDEMNIFICATION BY PENTEGRA ........................................ 17
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS ........................ 18
10.4 INDEMNIFICATION PROCEDURE .......................................... 19
10.5 RIGHT OF SETOFF .................................................... 19
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS .............................................. 20
12.2 INVESTMENTS; COMPLIANCE WITH LAW.................................... 20
12.3 ECONOMIC RISK; SOPHISTICATION ...................................... 21
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT........................................................ 21
14.2 NOTICES ............................................................ 21
14.3 FURTHER ASSURANCES.................................................. 22
14.4 EACH PARTY TO BEAR COSTS............................................ 22
14.5 PUBLIC DISCLOSURES.................................................. 22
14.6 GOVERNING LAW ...................................................... 22
14.7 CAPTIONS............................................................ 22
14.8 INTEGRATION OF EXHIBITS ............................................ 22
14.9 ENTIRE AGREEMENT/AMENDMENT.......................................... 22
14.10 COUNTERPARTS ....................................................... 23
14.11 BINDING EFFECT/ASSIGNMENT........................................... 23
14.12 COSTS OF ENFORCEMENT ............................................... 23
14.13 PRORATIONS ......................................................... 23
14.14 AMENDMENTS; WAIVERS................................................. 23
14.15 ARBITRATION......................................................... 23
14.16 SEVERABILITY ....................................................... 24
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and
executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra"), PATRICK T. KELLY, D.D.S., P.C., a Michigan
professional corporation ("Company") and PATRICK T. KELLY, D.D.S., shareholder
of Company (referred to herein as "Shareholder" or "Shareholders").
WITNESSETH:
WHEREAS, Company operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, the Boards of Directors of the Company and Pentegra have
determined that a reorganization between each of them is in the best interests
of their respective companies;
WHEREAS, Pentegra or its affiliated designee has entered into or intends to
enter into Agreements and Plans of Reorganization, Asset Contribution Agreements
and other acquisition agreements (collectively, the "Other Agreements") with
such persons or entities or the stockholders of such entities listed on EXHIBIT
A (together with Company, the "Target Companies") and simultaneously with the
closing of the reorganization contemplated herein, intends to consummate its
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock");
WHEREAS, it is intended for Federal income tax purposes that the
reorganization contemplated by this Agreement shall qualify as an reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION
1. TERMS OF THE REORGANIZATION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock
is consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".
1.2 MERGER. Subject to and upon the terms and conditions contained
herein, on the Closing Date, the Company shall be merged with and into Pentegra
(or its designated affiliate, in which case, the references herein to Pentegra
shall be to such designated affiliate and its shares of common stock) in
accordance with this Agreement and the separate corporate existence of the
Company shall thereupon cease
<PAGE>
("Merger"). Pentegra shall be the surviving corporation in the Merger
("Surviving Corporation") and shall continue to be governed by the laws of
the State of Delaware and the separate corporate existence of Pentegra with
all rights, privileges, powers, immunities and purposes shall continue
unaffected by the Merger. The Merger shall have the effects specified in the
Delaware General Corporation Law and the Michigan Business Corporation Law.
If all the conditions to the Merger set forth herein shall have been
fulfilled or waived in accordance herewith and this Agreement shall not have
been terminated in accordance herewith, the parties hereto shall cause to be
properly executed and filed on the Closing Date Certificates of Merger for
the Company meeting the applicable legal requirements. The Mergers shall
become effective on the Closing Date or the filing of such documents, in
accordance with applicable law, or at such later time as the parties hereto
have agreed upon and designated in such merger filings.
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of
Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation
and Bylaws of the Surviving Corporation until duly amended in accordance with
their terms.
1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra
immediately prior to the effective date of the Merger shall be the directors of
the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
Bylaws. The persons who are officers of Pentegra immediately prior to the
effective date of the Merger shall be the officers of the Surviving Corporation
and shall hold their respective offices until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal.
1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and
without any action on the part of the holder thereof, all shares of the
Company's common stock issued and outstanding on the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired and
shall cease to exist, and each holder of a certificate of representing shares of
Company common stock shall thereafter cease to have any rights with respect to
such shares except the right to receive the consideration set forth on ANNEX I
attached hereto (the "Merger Consideration"). Each share of common stock of
the Company held in treasury at the effective date of the Merger shall cease to
be outstanding and shall be cancelled and retired without payment of any
consideration therefor. On the effective date of the Merger, each share of
Pentegra Common Stock issued and outstanding shall, by virtue of he Mergers, and
without any action on the part of the holder thereof, continue unchanged and
remain outstanding as a share of validly issued, fully paid and nonassessable
share of Surviving Corporation common stock.
1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger,
the Shareholders, as the holders of a certificate or certificates representing
shares of Company common stock shall, upon surrender of such certificate or
certificates, receive the Merger Consideration, and until the certificate or
certificates of Company common stock shall have been surrendered by the
Shareholder and replaced by a certificate or certificates representing Pentegra
Common Stock (as set forth on ANNEX I), the certificate or certificates of
Company common stock shall, for all purposes be deemed to evidence ownership of
the number of shares of Pentegra Common Stock determined in accordance with the
provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the
Shareholders in the Merger shall be deemed for all purposes to have been issued
by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at
Closing the certificate or certificates representing the Company common stock
owned by them, duly endorsed in blank by the Shareholders, or accompanied by
duly executed blank stock powers, and with all necessary transfer tax and other
revenue stamps, acquired at the Shareholder's expense, affixed and cancelled.
1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under
<PAGE>
any of the Assets or otherwise to carry out this Agreement, in return for the
consideration set forth in this Agreement, the Company and Shareholders shall
excecute and deliver all such deeds, bills of sale, assignments and
assurances and take and do all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under the Assets in Pentegra or otherwise to carry
out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional
corporation or association, as applicable, duly organized, validly existing and
in good standing under the laws of the State of Michigan. Company has all
necessary corporate powers to own all of its assets and to carry on its business
as such business is now being conducted. Company does not own stock in or
control, directly or indirectly, any other corporation, association or business
organization, nor is Company a party to any joint venture or partnership. The
Shareholders are the sole shareholders of Company and own all outstanding shares
of capital stock free of all security interests, claims, encumbrances and liens
in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock
has been legally and validly issued and fully paid and nonassessable. No shares
of capital stock of Company are owned by Company in treasury. There are no
outstanding (a) bonds, debentures, notes or other obligations the holders of
which have the right to vote with the stockholders of Company on any matter, (b)
securities of Company convertible into equity interests in Company, or (c)
commitments, options, rights or warrants to issue any such equity interests in
Company, to issue securities of Company convertible into such equity interests,
or to redeem any securities of Company. No shares of capital stock of Company
have been issued or disposed of in violation of the preemptive rights, rights of
first refusal or similar rights of any of Company's stockholders. Company is
not required to qualify to do business as a foreign corporation in any other
state or jurisdiction by reason of its business, properties or activities in or
relating to such other state or jurisdiction. Company does not have any assets,
employees or offices in any state other than the state set forth in the first
sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power
to execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all action required by
law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to
authorize the execution, delivery and performance of this Agreement and such
related documents. Each Shareholder has the legal capacity to enter into and
perform this Agreement and the other agreements to be executed and delivered in
connection herewith. Company has obtained the approval of its stockholders
necessary to the consummation of the transactions contemplated herein. This
Agreement and all agreements and documents executed and delivered in connection
herewith have been, or will be as of the Closing Date, duly executed and
delivered by Company and Shareholders, as appropriate, and constitute or will
constitute the legal, valid and binding obligations of Company and Shareholders,
enforceable against Company and Shareholders in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of consents
described on EXHIBIT 2.4, the consummation of the actions contemplated hereby
will not, violate any provision of the Articles or Certificate of Incorporation
or Bylaws of Company or any provisions of, or result in the acceleration of, any
obligation under any mortgage, lien, lease, agreement, rent, instrument, order,
arbitration award, judgment or decree to which Company or any Shareholder is a
party or by which Company or any Shareholder is bound, or violate any material
restrictions of any kind to which Company is subject, or result in any lien or
encumbrance on any of Company's assets or the Assets.
<PAGE>
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets, or
waivers thereof, have been duly obtained and are in full force and effect and
are described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Company and Shareholders, threatened, which may result in the
revocation, cancellation or suspension, or any adverse modification, of any such
licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Company or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been declared or paid by Company on any of its capital stock
since the Balance Sheet Date. No repurchase of any of Company's capital stock
has been approved, effected or is pending, or is contemplated by Company.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Company and all amendments
thereto have been delivered to Pentegra. The minute books of Company contain
accurate minutes of all meetings of and consents to actions taken without
meetings of the Board of Directors and stockholders of Company since its
formation. The books of account of Company have been kept accurately in the
ordinary course of business and the revenues, expenses, assets and liabilities
of Company have been properly recorded in such books.
2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any related
unaudited statements of income, retained earnings, schedule of accounts
receivable, accounts payable and accrued liabilities, and cash flows for the
twelve months then ended (collectively, with the related notes thereto, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and results of operations of Company as of the dates and for the
periods indicated and reflect all fixed and contingent liabilities of Company.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Company or any Shareholder leases, as lessor or lessee, real
or personal property used in operating the Business, related to the Assets or
otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in
accordance with their respective terms, and there is not under any such lease
any existing default by Company, as lessor or lessee, or any condition or event
of which any Shareholder or Company has knowledge which with notice or lapse of
time, or both, would constitute a default, in respect of which Company or
Shareholders have not taken adequate steps to cure such default or to prevent a
default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Company and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set
forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to
<PAGE>
the Closing Date and evidence of such releases of liens and claims shall be
provided to Pentegra on the Closing Date and the Assets shall not be used to
satisfy such liens, claims or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned or
used by Company, are in good, current, standard and merchantable condition and
are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Company has no right, title or interest in or to patents, patent rights,
corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT
2.12 is a listing of all names of all predecessor companies of Company,
including the names of any entities from whom Company previously acquired
significant assets. Except for off-the-shelf software licenses and except as
set forth on EXHIBIT 2.12, Company is not a licensee in respect of any patents,
trademarks, service marks, trade names, copyrights or applications therefor, or
manufacturing processes, formulas or trade secrets or similar items and no such
licenses are necessary for the conduct of the Business or the use of the Assets.
No claim is pending or has been made to the effect that the Assets or the
present or past operations of Company in connection with the Assets or Business
infringe upon or conflict with the asserted rights of others to any patents,
patent rights, manufacturing processes, trade names, trademarks, service marks,
inventions, licenses, specialized treatment protocols, copyrights, formulas,
know-how and trade secrets. Company has the sole and exclusive right to use all
Assets constituting proprietary rights without infringing or violating the
rights of any third parties and no consents of any third parties are required
for the use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on
EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this
Agreement of: (a) the name of each director and officer of Company and the
offices held by each, (b) the most recent payroll report of Company, showing all
current employees of Company and their current levels of compensation, (c)
promised increases in compensation of employees of Company that have not yet
been effected, (d) oral or written employment agreements, consulting agreements
or independent contractor agreements (and all amendments thereto) to which
Company is a party, copies of which have been delivered to Pentegra, and (e) all
employee manuals, materials, policies, procedures and work-related rules, copies
of which have been delivered to Pentegra. Company is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Company has not engaged in any unfair labor practice.
There are no unfair labor practices charges or complaints pending or threatened
against Company, and Company has never been a party to any agreement with any
union, labor organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the Business
nor any of the Assets is subject to any pending, nor does Company or any
Shareholder have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Company, any Shareholder, the Business, the Assets or the transactions
contemplated by this Agreement, and, to the knowledge of Company and
Shareholders, no basis for any such action exists, nor is there any legal
impediment of which Company or any Shareholder has knowledge to the continued
operation of its business or the use of the Assets in the ordinary course,
subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Company has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts, obligations
and commitments of Company ("Contracts"), entered into in connection with and
related to the Assets or the Business, all of which are listed or incorporated
by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case
of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than
leases) attached hereto. Except as otherwise indicated on such Exhibits, all of
such Contracts are valid, binding and enforceable in accordance with their terms
and are in full force and effect, and no defenses, offsets or counterclaims have
been asserted or may be made by any party thereto. Except as indicated on such
Exhibits, there is not under any such Contract any existing default
<PAGE>
by Company or any Shareholder, or any condition or event of which Company or
any Shareholder has knowledge which with notice or lapse of time, or both,
would constitute a default. Company and Shareholders have no knowledge of any
default by any other party to such Contracts. Company and Shareholders have
not received notice of the intention of any party to any Contract to cancel
or terminate any Contract and have no reason to believe that any amendment or
change to any Contract is contemplated by any party thereto. Other than
those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT
2.13 and EXHIBIT 2.15, Company are not a party to any material written or
oral agreement contract, lease or arrangement, including without limitation,
any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product or
service;
(h) Loan agreement or other contract for money borrowed or lent or to
be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of the
Company or Shareholders, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Company on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) or entered into any contract, lease, license or
commitment, except in connection with the performance of this Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued, contingent
or otherwise) other than (i) liabilities shown or reflected on the Balance
Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary
course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
<PAGE>
(d) Made any payments to or loaned any money to any person or entity
other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have been
required due to income or operations of Company since the Balance Sheet Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants or
agents, or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of any officer, employee, consultant or agent;
(j) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties, assets
or business or the Business or the Assets, or experienced any other material
adverse change in its financial condition, assets, prospects, liabilities or
business;
(n) Declared or paid a distribution, payment or dividend of any kind
on the capital stock of Company;
(o) Repurchased, approved any repurchase or agreed to repurchase any
of Company's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Company has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it. All such tax returns are complete and accurate in all respects and
properly reflect the relevant taxes for the periods covered thereby. Company
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Company. There are no audits relating to taxes of
Company pending or in process or, to the knowledge of Company, threatened.
Company is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency. There are no
liens or encumbrances relating to taxes on or threatened against any of the
assets of Company. Company has withheld
<PAGE>
and paid all taxes required by law to have been withheld and paid by it.
Neither Company nor any predecessor of Company is or has been a party to any
tax allocation or sharing agreement or a member of an affiliated group of
corporations filing a consolidated Federal income tax return. Company has
delivered to Pentegra correct and complete copies of Company's three most
recently filed annual state, local and Federal income tax returns, together
with all examination reports and statements of deficiencies assessed against
or agreed to by Company during the three calendar year period preceding the
date of this Agreement. Company has neither made any payments, is obligated
to make any payments, or is a party to any agreement that under any
circumstance could obligate it to make any payments that will not be
deductible under Code section 280G.
(b) No Shareholder presently intends to dispose of any of the shares of
Pentegra Common Stock to be received hereunder nor is a party to any plan,
arrangement or agreement for the disposition of such shares. Company and
Shareholders have no knowledge, after due inquiry, of any such intent, plan,
arrangement or agreement by any Shareholder. Nothing contained herein shall
prohibit Shareholders from selling such shares of Pentegra Common Stock after
the designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated by
this Agreement which may be now or hereafter asserted against Pentegra, Company
or Company's shareholders resulting from any action taken by Company or any
Shareholder or their respective agents or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against
on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and
has not incurred since that date and will not have incurred as of the Closing
Date, any liabilities or obligations of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, other than those
incurred in the ordinary course of business or as set forth on EXHIBIT 2.16.
Company and Shareholders do not know, or have reasonable grounds to know, of any
basis for the assertion against Company or any Shareholder as of the Balance
Sheet Date, of any claim or liability of any nature in any amount not fully
reflected or reserved against on the Balance Sheet, or of any claim or liability
of any nature arising since that date other than those incurred in the ordinary
course of business or contemplated by this Agreement. All indebtedness of
Company (including without limitation, indebtedness for borrowed money,
guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached
hereto.
2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed
professional of Company carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the industry.
Valid and enforceable policies in such amounts are outstanding and duly in force
and will remain duly in force through the Closing Date. All such policies are
described in EXHIBIT 2.20 attached hereto and true and correct copies have been
delivered to Pentegra. Neither Shareholders nor Company have not received
notice or other communication from the issuer of any such insurance policy
cancelling or amending such policy or threatening to do so. Neither Company,
nor any Shareholder nor any licensed professional employee of Company has any
outstanding claims, settlements or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached
hereto, Company has neither established, nor maintains, nor is obligated to make
contributions to or under or otherwise participate in, (a) any bonus or other
type of compensation or employment plan, program, agreement, policy, commitment,
contract or arrangement (whether or not set forth in a written document); (b)
any pension, profit-sharing, retirement or other plan, program or arrangement;
or (c) any other employee benefit plan, fund or program, including, but not
limited to, those described in SECTION 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT
2.20 (individually "Company
<PAGE>
Plan," and collectively "Company Plans") have been operated and administered
in all material respects in accordance with all applicable laws, rules and
regulations, including without limitation, ERISA, the Internal Revenue Code
of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment
Act of 1967, as amended, and the related rules and regulations adopted by
those Federal agencies responsible for the administration of such laws. No
act or failure to act by Company has resulted in a "prohibited transaction"
(as defined in ERISA) with respect to the Company Plans. No "reportable
event" (as defined in ERISA) has occurred with respect to any of the Company
Plans. Company has not previously made, is not currently making, and is not
obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Company Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at least equal to the
value of plan liabilities or (ii) the value of plan liabilities in excess of
plan assets is disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing
Date, a party to any agreement or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree, rule or
regulation that materially and adversely affects the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Company,
the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's
licensed professional employees, and the conduct of the Business and use of the
Assets, have complied with all applicable laws, rules, regulations and licensing
requirements, including, without limitation, the Federal Environmental
Protection Act, the Occupational Safety and Health Act, the Americans with
Disabilities Act and any environmental laws and medical waste laws, and there
exist no violations by Company, any Shareholder or any licensed professional
employee of Company of any Federal, state or local law or regulation. Company
and Shareholders have not received any notice of a violation of any Federal,
state and local laws, regulations and ordinances relating to the operations of
the Business and Assets and no notice of any pending inspection or violation of
any such law, regulation or ordinance has been received by Company.
2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed
professional employee or independent contractor of Company has timely filed all
claims or other reports required to be filed with respect to the purchase of
services by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are no
pending appeals, overpayment determinations, adjustments, challenges, audit,
litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Company, any Shareholder
and each licensed professional employee of Company. Neither Company, nor any
Shareholder, nor any licensed professional employee of Company has been
convicted of, or pled guilty or nolo contendere to, patient abuse or negligence,
or any other Medicare or Medicaid program related offense and none has committed
any offense which may serve as the basis for suspension or exclusion from the
Medicare and Medicaid programs or any other third party payor program. With
respect to payors, Company, Shareholders and Company's licensed professional
employees has not (a) knowingly and willfully making or causing to be made a
false statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in determining
rights to any benefit or payment; (c) failed to disclose knowledge of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company
or Shareholders in this Agreement, and no Exhibit or certificate issued or
executed by, or information furnished by, officers or directors of Company or
any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or
in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a
<PAGE>
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Company has with any bank or other
financial institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Company, or their respective spouses,
children or affiliates, owns directly or indirectly, on an individual or joint
basis, any interest in, has a compensation or other financial arrangement with,
or serves as an officer or director of, any customer or supplier or competitor
of Company or any organization that has a material contract or arrangement with
Company.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of
the names and addresses of each payor of Company's services which accounted for
more than 10% of revenues of Company in the preceding fiscal year. Company has
good relations with all such payors and other material payors of Company and
none of such payors has notified Company that it intends to discontinue its
relationship with Company or to deny any claims submitted to such payor for
payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Company and Shareholders as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions required
by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize
the execution, delivery and performance of this Agreement and such related
documents. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing Date,
duly executed and delivered by Pentegra and constitute or will constitute the
legal, valid and binding obligations of Pentegra, enforceable against Pentegra
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and delivery
of this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and, the
consummation of the actions contemplated hereby will not, violate any provision
of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or decree
to which Pentegra is a party or by which Pentegra is bound, or violate any
material restrictions of any kind to which Pentegra is subject, or result in any
lien or encumbrance on any of Pentegra's assets. Other than as have been
obtained or as would not have a material adverse effect, there are no consents
of any person or entity required for the transaction contemplated hereby on
behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon
<PAGE>
Pentegra. Other than as would not have a material adverse effect, there are
no proceedings pending or, to the knowledge of Pentegra, threatened, which
may result in the revocation, cancellation or suspension, or any adverse
modification, of any such licenses or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any pending,
nor does Pentegra have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Pentegra, its business, assets or the transactions contemplated by
this Agreement, and, to the knowledge of Pentegra, no basis for any such action
exists, nor is there any legal impediment of which Pentegra has knowledge to the
continued operation of its business or the use of its Assets in the ordinary
course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports and
other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it, other than as would not have a material adverse effect. Pentegra
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Pentegra. There are no audits relating to taxes of
Pentegra pending or in process or, to the knowledge of Pentegra, threatened.
Pentegra is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the reorganization contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the reorganization contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra
in this Agreement, and no Exhibit or certificate issued by officers or directors
of Pentegra and furnished or to be furnished to Company or any Shareholder
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, agree that between the
date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall
use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Company and
Shareholders agree to complete the Exhibits hereto to be provided by them in
form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the
Business and use the Assets in the ordinary course. Company and Shareholders
shall not enter into any lease, contract, indebtedness, commitment, purchase or
sale or acquire or dispose of any capital asset relating to the Business or the
Assets except in the ordinary course of business. Company and Shareholders
shall use their best efforts to preserve the Business and Assets intact and
shall not take any action that would have an adverse effect on the Business or
Assets. Company and Shareholders shall use their best efforts to preserve
intact the
<PAGE>
relationships with payors, customers, suppliers, patients and others having
significant business relations with Company. Company and Shareholders shall
collect its receivables and pay its trade payables in the ordinary course of
business. Company and Shareholdes shall not introduce any new method of
management, operations or accounting.
4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and
its authorized representatives access to, and make available for inspection, all
of the assets and business of Company, the Business and the Assets, including
employees, customers and suppliers and permit Pentegra and its authorized
representatives to inspect and make copies of all documents, records and
information with respect to the business or assets of Company, the Business or
the Assets as Pentegra or its representatives may request. Company and
Shareholders shall promptly notify Pentegra in writing of (a) any notice or
communication relating to a default or event that, with notice or lapse of time
or both, could become a default, under any contract, commitment or obligation to
which Company is a party or relating to the Business or the Assets, and (b) any
adverse change in Company's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and
Shareholders shall use their best efforts to secure all necessary approvals and
consents of third parties to the consummation of the transactions contemplated
hereby, including consents described on EXHIBIT 2.4. Company and Shareholders
shall use their best efforts to obtain all licenses, permits, approvals or other
authorizations required under any law, rule, regulation, or otherwise to provide
the services of the Practice contemplated by the Service Agreement and to
conduct the intended business of the Practice and operate the Business and use
the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of Closing or the termination of this Agreement in accordance with the
provisions hereof, Company and Shareholders shall not, and shall use its best
efforts to cause Company's employees, agents and representatives not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer, including without limitation,
any proposal or offer to any Shareholder, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of Company or engage
in any negotiations concerning, or provide any confidential information or data
to, or have any discussions with, any person relating to such proposal or offer,
and Company and Shareholders will immediately cease any such activities,
discussions or negotiations heretofore conducted with respect to any of the
foregoing. Company and Shareholders shall immediately notify Pentegra if any
such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund completely
for any accrued benefits, where applicable, or vested accrued benefits for which
Company or any entity might have any liability whatsoever arising from any
insurance, pension plan, employment tax or similar liability of Company to any
employee or other person or entity (including, without limitation, any Company
Plan and any liability under employment contracts with Company) allocable to
services performed prior to the Closing Date. Company and Shareholders
acknowledge that the purpose and intent of this covenant is to assure that
Pentegra shall have no unfunded liability whatsoever at any time after the
Closing Date with respect to any of Company's employees or similar persons or
entities, including, without limitation, any Company Plan for the period prior
to the Closing Date.
4.7 EMPLOYEE MATTERS. Company shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of any Shareholder (other than in the ordinary course of business) or other
employee or an independent contractor of Company, adopt, amend or terminate any
compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect
<PAGE>
upon Company, its business, assets or prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Company, nor will any repurchase of any
of Company's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall
use their best efforts to take, or cause to be taken, all actions necessary to
effect the reorganization contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change
in any material respect the tax or financial accounting methods or practices
followed by Company (including any material change in any assumption underlying,
or any method of calculating, any bad debt, contingency or other reserve),
except as may be required by law or generally accepted accounting principles.
Company and Shareholders will duly, accurately and timely (without regard to any
extensions of time) file all returns, information statements and other documents
relating to taxes of Company required to be filed by it, and pay all taxes
required to be paid by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Company hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Company and Shareholders covenant and agree that all of the
creditors with respect to the Business and the Assets will be paid in full by
Company prior to the Closing Date, except to extent that any liability to such
creditors is assumed by Pentegra pursuant to this Agreement. If required by
Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment
of all creditors with respect to the Business and the Assets. Notwithstanding
the foregoing, Company and Shareholders may dispute the validity or amount of
any such creditor's claim without being deemed to be in violation of this
SECTION 4.11, provided that such dispute is in good faith and does not
unreasonably delay the resolution of the claim and provided, further that
Company and Shareholders agree to indemnify and bond Pentegra for such amounts
as is satisfactory to Pentegra.
4.12 LEASE. If Company leases any of its premises from any Shareholder or
other affiliate of Company or any shareholder of Company, Pentegra shall have
entered into a building lease (the "Building Lease") with the owner of such
premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, (i) a five year initial
term plus three five-year renewal options, (ii) a lease rate equal to the fair
market value lease rate, as agreed to by Pentegra, and (iii) such other
provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with
all requests made by Pentegra for the purpose of allowing Pentegra to hire those
non-dentist employees of Company designated by Pentegra, such employment to be
effective as of the Closing Date. Notwithstanding the above, Company and
Shareholders shall remain liable under any Company Plans for any claims incurred
by any employees or their spouses or dependents, and for all compensation,
bonuses, benefits and other such items and other liabilities related to
Company's employees incurred by Company prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all
employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be
treated as "leased employees" (as defined in Code Section 414(n)) of Company and
shall be treated as Clinic employees for purposes of eligibility and
participation in Company Plans.
4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective as
of the Closing Date.
<PAGE>
4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a
limited liability company, partnership or other legal entity (the "Practice")
approved by Pentegra for the purpose of practicing dentistry and entering
into the Service Agreement. The Practice shall be duly organized, in
existing and in good standing under the laws of the State in which the
practice of dentistry is conducted by the Shareholders and the Practice. The
Practice shall have all necessary power to own all of its assets and to carry
on its business as such business is now being conducted. The Shareholders
shall be the sole member/shareholder/partner of the Practice and own all such
interests free of all security interests, claims, encumbrances and liens.
Each interest in the Practice shall be legally and validly issued and fully
paid and nonassessable. There shall be no outstanding (a) bonds, debentures,
notes or other obligations the holders of which have the right to vote with
the members/partners/shareholders of the Practice on any matter, (b)
securities of the Practice convertible into equity interests in the Practice,
or (c) commitments, options, rights or warrants to issue any such equity
interests in the Practice, to issue securities of the Practice convertible
into such equity interests, or to redeem any securities of the Practice. No
interests of the Practice shall have been issued or disposed of in violation
of the preemptive rights, rights of first refusal or similar rights of any of
the Practice's members/partners/shareholders. The Practice shall quality to
do business as a foreign entity in any other state or jurisdiction by reason
of its business, properties or activities in or relating to such other state
or jurisdiction. The Company shall have transferred the Excluded Assets set
forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to
assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for
equity interest in the Practice, and the Company shall have distributed such
equity interests in the Practice to the Shareholders.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation,
Bylaws/Regulations and minutes of the Practice and all amendments thereto of
the Practice shall have been delivered to Pentegra and shall be in form and
substance satisfactory to Pentegra. The minute books of the Practice shall
contain all accurate minutes of the meetings of and consents to actions taken
without meetings of the members\managers/partners/board of directors of the
Practice since its formation. The books of account of the Practice shall
have been kept accurately in the ordinary course of business and the
revenues, expenses, assets and liabilities of the Practice shall have been
properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements
and other documents to be executed and delivered by it pursuant to this
Agreement, including without limitation, the Service Agreement and each
Employment Agreement or to be executed and delivered on the Closing Date, and
has taken all action required by law, its Organization/Partnership
Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to
authorize the execution, delivery and performance of such documents. The
Service Agreement, the Employment Agreement and the other agreements
contemplated hereby shall have been duly executed and delivered by the
Practice and constitute or will constitute the legal, valid and binding
obligations of the Practice enforceable against the Practice in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of the
Service Agreement, the Employment Agreements and the other agreements
contemplated hereby will not violate any provision of the organizational
documents of the Practice or any provisions of, or result in the acceleration
of, any obligation under any mortgage, lien, lease, agreement, rent,
instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any
material restrictions of any kind to which the Practice is subject, or result
in any lien or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
<PAGE>
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and have filed with
the proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS.
Pentegra, Shareholders and Company agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall
cooperate to promptly prepare and file with the Securities Exchange
Commission ("SEC") the Registration Statement on Form S-1 (or other
appropriate Form) to be filed by Pentegra in connection with its Initial
Public Offering (including the prospectus constituting a part thereof, the
"Registration Statement"). Pentegra shall obtain all necessary state
securities laws or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement and the Company and Shareholders
shall furnish all information concerning Company and Shareholders as may be
reasonable requested in connection with any such action.
Company and Shareholder represent and warrant that none of the
information or documents supplied or to be supplied by it specifically for
inclusion in the Registration Statement, by exhibit or otherwise, will, at
the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act of 1933, 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, in
light of the circumstances under which they were made, not misleading.
Company and Shareholders shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.
Company and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by
Pentegra in connection with the preparation of the Registration Statement and
each amendment or supplement thereto, or any other statement, filing, notice
or application made by or on behalf of each such party or any of its
subsidiaries to any governmental entity in connection with the transactions
contemplated by the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
<PAGE>
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Company and Shareholders contained herein shall have been true and correct
in all respects when initially made and shall be true and correct in all
respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Company and Shareholders prior
to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Company shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Company, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service
Agreement"), in substantially the form attached hereto as EXHIBIT 7.7,
pursuant to which Pentegra will provide management services to the Practice.
Each Shareholder shall have executed and delivered a Guaranty Agreement in
substantially the form attached as EXHIBIT 4.10 of the Service Agreement
pursuant to which Shareholder shall, among other things, guaranty the
obligations of the Practice under the Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused
each shareholder of Company that has an existing employment agreement with
Company to have terminated his or her employment agreement with Company and
shall have executed an employment agreement ("Employment Agreement") with the
Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise
satisfactory to Company and Pentegra.
7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have
obtained all necessary government and other third-party approvals and
consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables
or payables between Company and its shareholders or affiliates and Company
shall not have any liabilities, including indebtedness, guaranties and
capital leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an
additional insured on their liability insurance program in accordance with
SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working
<PAGE>
capital of Company since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Company and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pentegra contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Company shall have received all documents, duly
executed in form satisfactory to Company and its counsel, referred to in
SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days
after requested by Pentegra, Company and Shareholders shall deliver to
Pentegra the following, all of which shall be in a form satisfactory to
counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel
for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or
letter agreement in form and substance mutually acceptable to the parties
hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
<PAGE>
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of Company
authorizing the execution, delivery and performance of this Agreement, the
Service Agreement, the Employment Agreements and all related documents and
agreements each certified by the Secretary as being true and correct copies
of the original thereof;
(d) executed merger certificate and/or plan as required by
applicable state law;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra and the original stock certificates
together with blank stock powers representing the outstanding shares of
Company common stock;
(f) certificates of the Shareholders and a duly authorized officer
of Company dated as of the Closing Date, (i) as to the truth and correctness
of the representations and warranties of Company and Shareholder contained
herein; (ii) as to the performance of and compliance by Company and
Shareholder with all covenants contained herein; and (iii) certifying that
all conditions precedent of Company and Shareholders to the Closing have been
satisfied;
(g) a certificate of the Secretary of Company certifying as to the
incumbency of the directors and officers of Company and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Company;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Company and any state of required
foreign qualification of Company establishing that Company is in existence
and is in good standing to transact business in its state of incorporation;
(i) an opinion of counsel to Company and Shareholder opining as to
the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Company, the enforceability of this Agreement and the other agreements and
documents to be executed in connection herewith, and other matters reasonably
requested by Pentegra;
(j) non-foreign affidavits executed by Company;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Company and Shareholders, the following, all of which shall
be in a form satisfactory to counsel to Company and Shareholders and shall be
held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending
Closing, pursuant to an escrow agreement or letter agreement in form and
substance mutually acceptable to the parties hereto:
(a) the Merger Consideration;
<PAGE>
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Company;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Company;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Company to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit attached hereto, any agreement executed pursuant hereto, and
any certificate executed and delivered by any party pursuant to the terms of
this Agreement, shall constitute representations and warranties of Company
and Shareholders, jointly and severally, or of Pentegra, as the case may be.
All such representations and warranties, and all representations and
warranties expressly labeled as such in this Agreement shall survive the date
of this Agreement and the Closing Date for a period of five (5) years
following the Closing Date, except that (i) the representations and
warranties with respect to environmental and medical waste laws and health
care laws and matters shall survive for a period of fifteen (15) years and
tax representations shall survive until one year after the expiration of the
applicable statute of limitations. Each party covenants with the other
parties not to make any claim with respect to such representations and
warranties, against any party after the date on which such survival period
shall terminate. No party shall be entitled to claim indemnity from any
other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has
timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the
case may be. Each party hereby releases, acquits and discharges the other
party from any and all claims and demands, actions and causes of action,
damages, costs, expenses and rights of setoff with respect to which the
notices required by SECTION 10.2, 10.3 or 10.4, as
<PAGE>
applicable, are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH
OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS
SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED
PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES,
ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED
TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM
OR BY REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR
TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION
10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND
SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS,
DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING,
INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT
APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST
ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS,
DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
<PAGE>
HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO
BE FURNISHED BY INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR
AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL
LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION
ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS
RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER
THE CLOSING DATE,
(E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY
RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A
RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH
THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS
SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS
SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE
REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO
MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
<PAGE>
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the
defense of such action or proceeding, such Indemnified Person shall notify
Indemnitor thereof. If any such action or other proceeding shall be brought
against any Indemnified Person, Indemnitor shall, upon written notice given
within a reasonable time following receipt by Indemnitor of such notice from
Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Company or any Shareholder giving
rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra
shall be entitled to offset the amount of damages incurred by it as a result
of such breach of warranty, representation, covenant or agreement against any
amounts payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Company
or any Shareholder contained in this Agreement or in any certificate or other
document executed and delivered by Company or any Shareholder pursuant to
this Agreement is or becomes untrue or breached in any material respect or if
Company or any Shareholder fails to comply in any material respect with any
covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
(c) at any time by Company or any Shareholder if any representation or
warranty of Pentegra contained in this Agreement or in any certificate or
other document executed and delivered by Pentegra pursuant to this Agreement
is or becomes untrue or breached in any material respect or if Pentegra fails
to comply in any material respect with any covenant or agreement contained
herein and such misrepresentation, noncompliance or breach is not cured,
waived or eliminated within twenty (20) days after receipt of written notice
thereof;
(d) by Pentegra, Shareholders or Company if the transaction contemplated
hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Company, that such termination
<PAGE>
is desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares
of Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer
shall be treated as effective for any purpose or (b) engage in any
transaction, whether or not with respect to any shares of Pentegra Common
Stock or any interest therein, the intent or effect of which is to reduce the
risk of owning shares of Pentegra Common Stock. The certificates evidencing
the Pentegra Common Stock delivered to Company pursuant to the terms hereof
will bear a legend substantially in the form set forth below and containing
such other information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the
shares of Pentegra Common Stock to be delivered to Company pursuant to this
Agreement have not been and will not be registered under the Securities Act
of 1933 and may not be resold without compliance with the Securities Act of
1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to
this Agreement is being acquired solely for its own account, for investment
purposes only and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution. Each
Shareholder covenants, warrants and represents that none of the shares of
Pentegra Common Stock issued to it will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the Securities Act, as
amended, and the rules and regulations of the Securities Exchange Commission
and applicable state securities laws and regulations. All certificates
evidencing shares of Pentegra Common Stock shall bear the following legend in
addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock
shall bear any legend required by the securities or blue sky laws of any
state where Company resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the
economic risk of an investment in Pentegra Common Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and
have such knowledge and experience in financial and business matters that
they are capable of evaluating the merits and risks of the proposed
investment and therefore have the capacity to protect their own interests in
connection with the acquisition of the Pentegra Common Stock. Shareholders
and their representatives have had an adequate opportunity to ask questions
and receive answers from the officers of Pentegra concerning any and all
matters relating to the background and experience of the officers
<PAGE>
and directors of Pentegra, the plans for the operations of the business of
Pentegra, and any plans for additional acquisitions and the like.
Shareholders and their representatives have asked any and all questions in
the nature described in the preceding sentence and all questions have been
answered to their satisfaction. Shareholders are "accredited investors" as
defined in Regulation D of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Company and Shareholders agree that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally
through no fault of Company or Shareholders, (ii) disclosure is required by
law or the order of any governmental authority under color of law, provided,
that prior to disclosing any information pursuant to this clause (ii),
Company and Shareholders shall, if possible, give prior written notice
thereof to the other parties hereto, and provide such other parties hereto
with the opportunity to contest such disclosure, (iii) Company and
Shareholders reasonably believe that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party, or
(iv) Company and Shareholders are the sole and exclusive owner of such
confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Company or Shareholders of the provisions of this SECTION 13, Pentegra shall
be entitled to an injunction restraining Company and Shareholders from
disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Pentegra from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. The obligations of the parties under this SECTION 13 shall
survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement will qualify as a reorganization within the meaning of
Section 368(a) of the Code. The tax returns (and schedules thereto) of
Shareholders, Company and Pentegra shall be filed in a manner consistent
with such intention and Shareholders and Pentegra shall each provide the
other with such tax information, reports, returns or schedules as may be
reasonably required to assist the other in so reporting the transactions
contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
<PAGE>
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Company and Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Company or any Shareholder for services
rendered in connection with negotiating and closing the transactions
contemplated by this Agreement or the documents to be executed in connection
herewith, whether or not such costs or expenses are incurred before or after
the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Company.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
<PAGE>
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one and the
same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Company, be relieved from its obligations
to Company under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Company, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Company and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Company or may demand from Company, and Company agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Companys or Shareholders (hereinafter referred to as a "Party"), whether made
before or after the institution of any legal proceeding, any dispute among
the parties hereto in any way arising out of, related to, or in connection
with this Agreement (hereinafter a "Dispute"), shall be resolved by binding
arbitration in accordance with the terms of this Section (hereinafter the
"Arbitration Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
<PAGE>
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or foreclosing upon any
personal property in which there has been granted a security interest or lien
by a Party in the Documents. In Disputes involving indebtedness or other
monetary obligations, each Party agrees that the other Party may proceed
against all liable persons, jointly and severally against one or more of
them, without impairing rights against other liable persons. Nor shall a
Party be required to join the principal obligor or any other liable persons
(e.g., sureties or guarantors) in any proceeding against a particular person.
A Party may release or settle with one or more liable persons as the Party
deems fit without releasing or impairing rights to proceed against any
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoeniz,
Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the
<PAGE>
ordinary course of business of the Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
PATRICK T. KELLY, D.D.S., P.C.
By: /s/ Patrick T. Kelly
-------------------------------------
Its: Owner
-------------------------------------
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
-------------------------------------
Its: Senior Vice President
-------------------------------------
/s/ Patrick T. Kelly, D.D.S.
----------------------------------------
Patrick T. Kelly, D.D.S.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
Annex I Merger Consideration
A Target Companies
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
4.16 Excluded Assets and Excluded Liabilities
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
BRIAN K. KNIFF, D.D.S., P.C.
BRIAN K. KNIFF, D.D.S.
and
GORDON LEDINGHAM, D.D.S.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. TERMS OF THE REORGANIZATION
1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . . . . 2
1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 4
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 9
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 12
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 13
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 13
Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 14
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 14
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 14
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 14
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 14
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 15
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 15
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 15
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . . . . 15
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 17
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . . . 18
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 19
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 20
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 21
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . 22
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . 22
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . 22
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . 23
14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and
executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC.,
a Delaware corporation ("Pentegra"), BRIAN K. KNIFF, D.D.S., P.C., an Arizona
professional corporation ("Cmpany") and BRIAN K. KNIFF, D.D.S. AND GORDON
LEDINGHAM, D.D.S., shareholder of Company (referred to herein as
"Shareholder" or "Shareholders").
WITNESSETH:
WHEREAS, Company operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, the Boards of Directors of the Company and Pentegra have
determined that a reorganization between each of them is in the best
interests of their respective companies;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Company, the "Target Companies")
and simultaneously with the closing of the reorganization contemplated
herein, intends to consummate its initial public offering ("Initial Public
Offering") of shares of its common stock, par value $.01 per share ("Pentegra
Common Stock");
WHEREAS, it is intended for Federal income tax purposes that the
reorganization contemplated by this Agreement shall qualify as an
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE REORGANIZATION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.2 MERGER. Subject to and upon the terms and conditions contained
herein, on the Closing Date, the Company shall be merged with and into
Pentegra (or its designated affiliate, in which case, the references herein
to Pentegra shall be to such designated affiliate and its shares of common
stock) in accordance with this Agreement and the separate corporate existence
of the Company shall thereupon cease
<PAGE>
("Merger"). Pentegra shall be the surviving corporation in the Merger
("Surviving Corporation") and shall continue to be governed by the laws of
the State of Delaware and the separate corporate existence of Pentegra with
all rights, privileges, powers, immunities and purposes shall continue
unaffected by the Merger. The Merger shall have the effects specified in the
Delaware General Corporation Law and the Arizona Business Corporation Law.
If all the conditions to the Merger set forth herein shall have been
fulfilled or waived in accordance herewith and this Agreement shall not have
been terminated in accordance herewith, the parties hereto shall cause to be
properly executed and filed on the Closing Date Certificates of Merger for
the Company meeting the applicable legal requirements. The Mergers shall
become effective on the Closing Date or the filing of such documents, in
accordance with applicable law, or at such later time as the parties hereto
have agreed upon and designated in such merger filings.
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of
Incorporation and Bylaws of Pentegra shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation until duly amended in
accordance with their terms.
1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra
immediately prior to the effective date of the Merger shall be the directors
of the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal
in accordance with the Surviving Corporation's Certificate of Incorporation
and Bylaws. The persons who are officers of Pentegra immediately prior to
the effective date of the Merger shall be the officers of the Surviving
Corporation and shall hold their respective offices until their successors
have been duly elected or appointed and qualified or until their earlier
death, resignation or removal.
1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and
without any action on the part of the holder thereof, all shares of the
Company's common stock issued and outstanding on the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired and
shall cease to exist, and each holder of a certificate of representing shares
of Company common stock shall thereafter cease to have any rights with
respect to such shares except the right to receive the consideration set
forth on ANNEX I attached hereto (the "Merger Consideration"). Each share
of common stock of the Company held in treasury at the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired
without payment of any consideration therefor. On the effective date of the
Merger, each share of Pentegra Common Stock issued and outstanding shall, by
virtue of he Mergers, and without any action on the part of the holder
thereof, continue unchanged and remain outstanding as a share of validly
issued, fully paid and nonassessable share of Surviving Corporation common
stock.
1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the
Merger, the Shareholders, as the holders of a certificate or certificates
representing shares of Company common stock shall, upon surrender of such
certificate or certificates, receive the Merger Consideration, and until the
certificate or certificates of Company common stock shall have been
surrendered by the Shareholder and replaced by a certificate or certificates
representing Pentegra Common Stock (as set forth on ANNEX I), the certificate
or certificates of Company common stock shall, for all purposes be deemed to
evidence ownership of the number of shares of Pentegra Common Stock
determined in accordance with the provisions of ANNEX I. All shares of
Pentegra Common Stock issuable to the Shareholders in the Merger shall be
deemed for all purposes to have been issued by Pentegra on the Closing Date.
The Shareholders shall deliver to Pentegra at Closing the certificate or
certificates representing the Company common stock owned by them, duly
endorsed in blank by the Shareholders, or accompanied by duly executed blank
stock powers, and with all necessary transfer tax and other revenue stamps,
acquired at the Shareholder's expense, affixed and cancelled.
1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under
<PAGE>
any of the Assets or otherwise to carry out this Agreement, in return for the
consideration set forth in this Agreement, the Company and Shareholders shall
excecute and deliver all such deeds, bills of sale, assignments and
assurances and take and do all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under the Assets in Pentegra or otherwise to carry
out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional
corporation or association, as applicable, duly organized, validly existing
and in good standing under the laws of the State of Arizona. Company has all
necessary corporate powers to own all of its assets and to carry on its
business as such business is now being conducted. Company does not own stock
in or control, directly or indirectly, any other corporation, association or
business organization, nor is Company a party to any joint venture or
partnership. The Shareholders are the sole shareholders of Company and own
all outstanding shares of capital stock free of all security interests,
claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each
share of Company's common stock has been legally and validly issued and fully
paid and nonassessable. No shares of capital stock of Company are owned by
Company in treasury. There are no outstanding (a) bonds, debentures, notes or
other obligations the holders of which have the right to vote with the
stockholders of Company on any matter, (b) securities of Company convertible
into equity interests in Company, or (c) commitments, options, rights or
warrants to issue any such equity interests in Company, to issue securities
of Company convertible into such equity interests, or to redeem any
securities of Company. No shares of capital stock of Company have been
issued or disposed of in violation of the preemptive rights, rights of first
refusal or similar rights of any of Company's stockholders. Company is not
required to qualify to do business as a foreign corporation in any other
state or jurisdiction by reason of its business, properties or activities in
or relating to such other state or jurisdiction. Company does not have any
assets, employees or offices in any state other than the state set forth in
the first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate
power to execute, deliver and perform this Agreement and all agreements and
other documents executed and delivered by it pursuant to this Agreement or to
be executed and delivered on the Closing Date, and has taken all action
required by law, its Articles or Certificate of Incorporation, its Bylaws or
otherwise, to authorize the execution, delivery and performance of this
Agreement and such related documents. Each Shareholder has the legal
capacity to enter into and perform this Agreement and the other agreements to
be executed and delivered in connection herewith. Company has obtained the
approval of its stockholders necessary to the consummation of the
transactions contemplated herein. This Agreement and all agreements and
documents executed and delivered in connection herewith have been, or will be
as of the Closing Date, duly executed and delivered by Company and
Shareholders, as appropriate, and constitute or will constitute the legal,
valid and binding obligations of Company and Shareholders, enforceable
against Company and Shareholders in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of
consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, violate any provision of the Articles or
Certificate of Incorporation or Bylaws of Company or any provisions of, or
result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or
decree to which Company or any Shareholder is a party or by which Company or
any Shareholder is bound, or violate any material restrictions of any kind to
which Company is subject, or result in any lien or encumbrance on any of
Company's assets or the Assets.
<PAGE>
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to
the knowledge of Company and Shareholders, threatened, which may result in
the revocation, cancellation or suspension, or any adverse modification, of
any such licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Company or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been declared or paid by Company on any of its capital stock
since the Balance Sheet Date. No repurchase of any of Company's capital
stock has been approved, effected or is pending, or is contemplated by
Company.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Company and all
amendments thereto have been delivered to Pentegra. The minute books of
Company contain accurate minutes of all meetings of and consents to actions
taken without meetings of the Board of Directors and stockholders of Company
since its formation. The books of account of Company have been kept
accurately in the ordinary course of business and the revenues, expenses,
assets and liabilities of Company have been properly recorded in such books.
2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any
related unaudited statements of income, retained earnings, schedule of
accounts receivable, accounts payable and accrued liabilities, and cash flows
for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Company as of
the dates and for the periods indicated and reflect all fixed and contingent
liabilities of Company.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Company or any Shareholder leases, as lessor or lessee,
real or personal property used in operating the Business, related to the
Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and
enforceable in accordance with their respective terms, and there is not under
any such lease any existing default by Company, as lessor or lessee, or any
condition or event of which any Shareholder or Company has knowledge which
with notice or lapse of time, or both, would constitute a default, in respect
of which Company or Shareholders have not taken adequate steps to cure such
default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Company and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances
set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to
<PAGE>
the Closing Date and evidence of such releases of liens and claims shall be
provided to Pentegra on the Closing Date and the Assets shall not be used to
satisfy such liens, claims or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Company, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Company has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Company, including the names of any entities from whom Company previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Company in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Company has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the name of each director and officer of Company
and the offices held by each, (b) the most recent payroll report of Company,
showing all current employees of Company and their current levels of
compensation, (c) promised increases in compensation of employees of Company
that have not yet been effected, (d) oral or written employment agreements,
consulting agreements or independent contractor agreements (and all
amendments thereto) to which Company is a party, copies of which have been
delivered to Pentegra, and (e) all employee manuals, materials, policies,
procedures and work-related rules, copies of which have been delivered to
Pentegra. Company is in compliance with all applicable laws, rules,
regulations and ordinances respecting employment and employment practices.
Company has not engaged in any unfair labor practice. There are no unfair
labor practices charges or complaints pending or threatened against Company,
and Company has never been a party to any agreement with any union, labor
organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the
Business nor any of the Assets is subject to any pending, nor does Company or
any Shareholder have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Company, any Shareholder, the Business, the Assets or the
transactions contemplated by this Agreement, and, to the knowledge of Company
and Shareholders, no basis for any such action exists, nor is there any legal
impediment of which Company or any Shareholder has knowledge to the continued
operation of its business or the use of the Assets in the ordinary course,
subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Company has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Company ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted or may be made
by any party thereto. Except as indicated on such Exhibits, there is not
under any such Contract any existing default
<PAGE>
by Company or any Shareholder, or any condition or event of which Company or
any Shareholder has knowledge which with notice or lapse of time, or both,
would constitute a default. Company and Shareholders have no knowledge of
any default by any other party to such Contracts. Company and Shareholders
have not received notice of the intention of any party to any Contract to
cancel or terminate any Contract and have no reason to believe that any
amendment or change to any Contract is contemplated by any party thereto.
Other than those contracts, obligations and commitments listed on EXHIBIT
2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material
written or oral agreement contract, lease or arrangement, including without
limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
the Company or Shareholders, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Company on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
<PAGE>
(d) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Company since the Balance Sheet
Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(j) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties,
assets or business or the Business or the Assets, or experienced any other
material adverse change in its financial condition, assets, prospects,
liabilities or business;
(n) Declared or paid a distribution, payment or dividend of any
kind on the capital stock of Company;
(o) Repurchased, approved any repurchase or agreed to repurchase
any of Company's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Company has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Company has not received any notice that any tax deficiency or
delinquency has been or may be asserted against Company. There are no
audits relating to taxes of Company pending or in process or, to the
knowledge of Company, threatened. Company is not currently the beneficiary of
any waiver of any statute of limitations in respect of taxes nor of any
extension of time within which to file any tax return or to pay any tax
assessment or deficiency. There are no liens or encumbrances relating to
taxes on or threatened against any of the assets of Company. Company has
withheld
<PAGE>
and paid all taxes required by law to have been withheld and paid by it.
Neither Company nor any predecessor of Company is or has been a party to any
tax allocation or sharing agreement or a member of an affiliated group of
corporations filing a consolidated Federal income tax return. Company has
delivered to Pentegra correct and complete copies of Company's three most
recently filed annual state, local and Federal income tax returns, together
with all examination reports and statements of deficiencies assessed against
or agreed to by Company during the three calendar year period preceding the
date of this Agreement. Company has neither made any payments, is obligated
to make any payments, or is a party to any agreement that under any
circumstance could obligate it to make any payments that will not be
deductible under Code section 280G.
(b) No Shareholder presently intends to dispose of any of the shares of
Pentegra Common Stock to be received hereunder nor is a party to any plan,
arrangement or agreement for the disposition of such shares. Company and
Shareholders have no knowledge, after due inquiry, of any such intent, plan,
arrangement or agreement by any Shareholder. Nothing contained herein shall
prohibit Shareholders from selling such shares of Pentegra Common Stock after
the designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated
by this Agreement which may be now or hereafter asserted against Pentegra,
Company or Company's shareholders resulting from any action taken by Company
or any Shareholder or their respective agents or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Company did not have, as of the Balance Sheet
Date, and has not incurred since that date and will not have incurred as of
the Closing Date, any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
other than those incurred in the ordinary course of business or as set forth
on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable
grounds to know, of any basis for the assertion against Company or any
Shareholder as of the Balance Sheet Date, of any claim or liability of any
nature in any amount not fully reflected or reserved against on the Balance
Sheet, or of any claim or liability of any nature arising since that date
other than those incurred in the ordinary course of business or contemplated
by this Agreement. All indebtedness of Company (including without
limitation, indebtedness for borrowed money, guaranties and capital lease
obligations) is described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed
professional of Company carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the
industry. Valid and enforceable policies in such amounts are outstanding and
duly in force and will remain duly in force through the Closing Date. All
such policies are described in EXHIBIT 2.20 attached hereto and true and
correct copies have been delivered to Pentegra. Neither Shareholders nor
Company have not received notice or other communication from the issuer of
any such insurance policy cancelling or amending such policy or threatening
to do so. Neither Company, nor any Shareholder nor any licensed professional
employee of Company has any outstanding claims, settlements or premiums owed
against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Company has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company
<PAGE>
Plan," and collectively "Company Plans") have been operated and administered
in all material respects in accordance with all applicable laws, rules and
regulations, including without limitation, ERISA, the Internal Revenue Code
of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment
Act of 1967, as amended, and the related rules and regulations adopted by
those Federal agencies responsible for the administration of such laws. No
act or failure to act by Company has resulted in a "prohibited transaction"
(as defined in ERISA) with respect to the Company Plans. No "reportable
event" (as defined in ERISA) has occurred with respect to any of the Company
Plans. Company has not previously made, is not currently making, and is not
obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Company Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at least equal to the
value of plan liabilities or (ii) the value of plan liabilities in excess of
plan assets is disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Company, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and
Company's licensed professional employees, and the conduct of the Business
and use of the Assets, have complied with all applicable laws, rules,
regulations and licensing requirements, including, without limitation, the
Federal Environmental Protection Act, the Occupational Safety and Health Act,
the Americans with Disabilities Act and any environmental laws and medical
waste laws, and there exist no violations by Company, any Shareholder or any
licensed professional employee of Company of any Federal, state or local law
or regulation. Company and Shareholders have not received any notice of a
violation of any Federal, state and local laws, regulations and ordinances
relating to the operations of the Business and Assets and no notice of any
pending inspection or violation of any such law, regulation or ordinance has
been received by Company.
2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed
professional employee or independent contractor of Company has timely filed
all claims or other reports required to be filed with respect to the purchase
of services by third-party payors, and all such claims or reports are
complete and accurate, and has no liability to any payor with respect
thereto. There are no pending appeals, overpayment determinations,
adjustments, challenges, audit, litigation or notices of intent to open
Medicare or Medicaid claim determinations or other reports required to be
filed by Company, any Shareholder and each licensed professional employee of
Company. Neither Company, nor any Shareholder, nor any licensed professional
employee of Company has been convicted of, or pled guilty or nolo contendere
to, patient abuse or negligence, or any other Medicare or Medicaid program
related offense and none has committed any offense which may serve as the
basis for suspension or exclusion from the Medicare and Medicaid programs or
any other third party payor program. With respect to payors, Company,
Shareholders and Company's licensed professional employees has not (a)
knowingly and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company
or Shareholders in this Agreement, and no Exhibit or certificate issued or
executed by, or information furnished by, officers or directors of Company or
any Shareholder and furnished or to be furnished to Pentegra pursuant hereto,
or in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a
<PAGE>
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Company has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Company, or their respective spouses,
children or affiliates, owns directly or indirectly, on an individual or
joint basis, any interest in, has a compensation or other financial
arrangement with, or serves as an officer or director of, any customer or
supplier or competitor of Company or any organization that has a material
contract or arrangement with Company.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Company's services which
accounted for more than 10% of revenues of Company in the preceding fiscal
year. Company has good relations with all such payors and other material
payors of Company and none of such payors has notified Company that it
intends to discontinue its relationship with Company or to deny any claims
submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Company and Shareholders as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon
<PAGE>
Pentegra. Other than as would not have a material adverse effect, there are
no proceedings pending or, to the knowledge of Pentegra, threatened, which
may result in the revocation, cancellation or suspension, or any adverse
modification, of any such licenses or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has knowledge to the continued operation of its business or the use
of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the reorganization contemplated
hereby will be as of the Closing Date duly and validly authorized by all
necessary corporate action on the part of Pentegra. The Pentegra Common
Stock to be issued in connection with the reorganization contemplated hereby,
when issued in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Company or any
Shareholder pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, agree that between the
date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall
use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Company
and Shareholders agree to complete the Exhibits hereto to be provided by them
in form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the
Business and use the Assets in the ordinary course. Company and Shareholders
shall not enter into any lease, contract, indebtedness, commitment, purchase
or sale or acquire or dispose of any capital asset relating to the Business
or the Assets except in the ordinary course of business. Company and
Shareholders shall use their best efforts to preserve the Business and Assets
intact and shall not take any action that would have an adverse effect on the
Business or Assets. Company and Shareholders shall use their best efforts to
preserve intact the
<PAGE>
relationships with payors, customers, suppliers, patients and others having
significant business relations with Company. Company and Shareholders shall
collect its receivables and pay its trade payables in the ordinary course of
business. Company and Shareholdes shall not introduce any new method of
management, operations or accounting.
4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra
and its authorized representatives access to, and make available for
inspection, all of the assets and business of Company, the Business and the
Assets, including employees, customers and suppliers and permit Pentegra and
its authorized representatives to inspect and make copies of all documents,
records and information with respect to the business or assets of Company,
the Business or the Assets as Pentegra or its representatives may request.
Company and Shareholders shall promptly notify Pentegra in writing of (a) any
notice or communication relating to a default or event that, with notice or
lapse of time or both, could become a default, under any contract, commitment
or obligation to which Company is a party or relating to the Business or the
Assets, and (b) any adverse change in Company's or the Business' financial
condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and
Shareholders shall use their best efforts to secure all necessary approvals
and consents of third parties to the consummation of the transactions
contemplated hereby, including consents described on EXHIBIT 2.4. Company
and Shareholders shall use their best efforts to obtain all licenses,
permits, approvals or other authorizations required under any law, rule,
regulation, or otherwise to provide the services of the Practice contemplated
by the Service Agreement and to conduct the intended business of the Practice
and operate the Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance
with the provisions hereof, Company and Shareholders shall not, and shall use
its best efforts to cause Company's employees, agents and representatives not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or
the making or implementation of any proposal or offer, including without
limitation, any proposal or offer to any Shareholder, with respect to a
merger, acquisition, consolidation or similar transaction involving, or the
purchase of all or any significant portion of the assets or any equity
securities of Company or engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person relating to such proposal or offer, and Company and Shareholders will
immediately cease any such activities, discussions or negotiations heretofore
conducted with respect to any of the foregoing. Company and Shareholders
shall immediately notify Pentegra if any such inquiries or proposals are
received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Company or any entity might have any liability whatsoever
arising from any insurance, pension plan, employment tax or similar
liability of Company to any employee or other person or entity (including,
without limitation, any Company Plan and any liability under employment
contracts with Company) allocable to services performed prior to the Closing
Date. Company and Shareholders acknowledge that the purpose and intent of
this covenant is to assure that Pentegra shall have no unfunded liability
whatsoever at any time after the Closing Date with respect to any of
Company's employees or similar persons or entities, including, without
limitation, any Company Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Company shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash
compensation of any Shareholder (other than in the ordinary course of
business) or other employee or an independent contractor of Company, adopt,
amend or terminate any compensation plan, employment agreement, independent
contractor agreement, employee policies and procedures or employee benefit
plan, take any action that could deplete the assets of any employee benefit,
or fail to pay any premium or contribution due or file any report with
respect to any employee benefit plan, or take any other actions with respect
to its employees or employee matters which might have an adverse effect
<PAGE>
upon Company, its business, assets or prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Company, nor will any repurchase of
any of Company's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders
shall use their best efforts to take, or cause to be taken, all actions
necessary to effect the reorganization contemplated hereby under applicable
law.
4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not
change in any material respect the tax or financial accounting methods or
practices followed by Company (including any material change in any
assumption underlying, or any method of calculating, any bad debt,
contingency or other reserve), except as may be required by law or generally
accepted accounting principles. Company and Shareholders will duly,
accurately and timely (without regard to any extensions of time) file all
returns, information statements and other documents relating to taxes of
Company required to be filed by it, and pay all taxes required to be paid by
it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Company hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Company and Shareholders covenant and agree that all of the
creditors with respect to the Business and the Assets will be paid in full by
Company prior to the Closing Date, except to extent that any liability to
such creditors is assumed by Pentegra pursuant to this Agreement. If
required by Pentegra, Company and Shareholders shall furnish Pentegra with
proof of payment of all creditors with respect to the Business and the
Assets. Notwithstanding the foregoing, Company and Shareholders may dispute
the validity or amount of any such creditor's claim without being deemed to
be in violation of this SECTION 4.11, provided that such dispute is in good
faith and does not unreasonably delay the resolution of the claim and
provided, further that Company and Shareholders agree to indemnify and bond
Pentegra for such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Company leases any of its premises from any Shareholder
or other affiliate of Company or any shareholder of Company, Pentegra shall
have entered into a building lease (the "Building Lease") with the owner of
such premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, (i) a five year
initial term plus three five-year renewal options, (ii) a lease rate equal to
the fair market value lease rate, as agreed to by Pentegra, and (iii) such
other provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with
all requests made by Pentegra for the purpose of allowing Pentegra to hire
those non-dentist employees of Company designated by Pentegra, such
employment to be effective as of the Closing Date. Notwithstanding the
above, Company and Shareholders shall remain liable under any Company Plans
for any claims incurred by any employees or their spouses or dependents, and
for all compensation, bonuses, benefits and other such items and other
liabilities related to Company's employees incurred by Company prior to the
Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all
employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall
be treated as "leased employees" (as defined in Code Section 414(n)) of
Company and shall be treated as Clinic employees for purposes of eligibility
and participation in Company Plans.
4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective
as of the Closing Date.
<PAGE>
4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a
limited liability company, partnership or other legal entity (the "Practice")
approved by Pentegra for the purpose of practicing dentistry and entering
into the Service Agreement. The Practice shall be duly organized, in
existing and in good standing under the laws of the State in which the
practice of dentistry is conducted by the Shareholders and the Practice. The
Practice shall have all necessary power to own all of its assets and to carry
on its business as such business is now being conducted. The Shareholders
shall be the sole member/shareholder/partner of the Practice and own all such
interests free of all security interests, claims, encumbrances and liens.
Each interest in the Practice shall be legally and validly issued and fully
paid and nonassessable. There shall be no outstanding (a) bonds, debentures,
notes or other obligations the holders of which have the right to vote with
the members/partners/shareholders of the Practice on any matter, (b)
securities of the Practice convertible into equity interests in the Practice,
or (c) commitments, options, rights or warrants to issue any such equity
interests in the Practice, to issue securities of the Practice convertible
into such equity interests, or to redeem any securities of the Practice. No
interests of the Practice shall have been issued or disposed of in violation
of the preemptive rights, rights of first refusal or similar rights of any of
the Practice's members/partners/shareholders. The Practice shall quality to
do business as a foreign entity in any other state or jurisdiction by reason
of its business, properties or activities in or relating to such other state
or jurisdiction. The Company shall have transferred the Excluded Assets set
forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to
assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for
equity interest in the Practice, and the Company shall have distributed such
equity interests in the Practice to the Shareholders.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation,
Bylaws/Regulations and minutes of the Practice and all amendments thereto of
the Practice shall have been delivered to Pentegra and shall be in form and
substance satisfactory to Pentegra. The minute books of the Practice shall
contain all accurate minutes of the meetings of and consents to actions taken
without meetings of the members\managers/partners/board of directors of the
Practice since its formation. The books of account of the Practice shall
have been kept accurately in the ordinary course of business and the
revenues, expenses, assets and liabilities of the Practice shall have been
properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements
and other documents to be executed and delivered by it pursuant to this
Agreement, including without limitation, the Service Agreement and each
Employment Agreement or to be executed and delivered on the Closing Date, and
has taken all action required by law, its Organization/Partnership
Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to
authorize the execution, delivery and performance of such documents. The
Service Agreement, the Employment Agreement and the other agreements
contemplated hereby shall have been duly executed and delivered by the
Practice and constitute or will constitute the legal, valid and binding
obligations of the Practice enforceable against the Practice in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of the
Service Agreement, the Employment Agreements and the other agreements
contemplated hereby will not violate any provision of the organizational
documents of the Practice or any provisions of, or result in the acceleration
of, any obligation under any mortgage, lien, lease, agreement, rent,
instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any
material restrictions of any kind to which the Practice is subject, or result
in any lien or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
<PAGE>
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and have filed with
the proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS.
Pentegra, Shareholders and Company agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall
cooperate to promptly prepare and file with the Securities Exchange
Commission ("SEC") the Registration Statement on Form S-1 (or other
appropriate Form) to be filed by Pentegra in connection with its Initial
Public Offering (including the prospectus constituting a part thereof, the
"Registration Statement"). Pentegra shall obtain all necessary state
securities laws or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement and the Company and Shareholders
shall furnish all information concerning Company and Shareholders as may be
reasonable requested in connection with any such action.
Company and Shareholder represent and warrant that none of the
information or documents supplied or to be supplied by it specifically for
inclusion in the Registration Statement, by exhibit or otherwise, will, at
the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act of 1933, 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, in
light of the circumstances under which they were made, not misleading.
Company and Shareholders shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.
Company and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by
Pentegra in connection with the preparation of the Registration Statement and
each amendment or supplement thereto, or any other statement, filing, notice
or application made by or on behalf of each such party or any of its
subsidiaries to any governmental entity in connection with the transactions
contemplated by the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
<PAGE>
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Company and Shareholders contained herein shall have been true and correct
in all respects when initially made and shall be true and correct in all
respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Company and Shareholders prior
to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Company shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Company, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service
Agreement"), in substantially the form attached hereto as EXHIBIT 7.7,
pursuant to which Pentegra will provide management services to the Practice.
Each Shareholder shall have executed and delivered a Guaranty Agreement in
substantially the form attached as EXHIBIT 4.10 of the Service Agreement
pursuant to which Shareholder shall, among other things, guaranty the
obligations of the Practice under the Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused
each shareholder of Company that has an existing employment agreement with
Company to have terminated his or her employment agreement with Company and
shall have executed an employment agreement ("Employment Agreement") with the
Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise
satisfactory to Company and Pentegra.
7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have
obtained all necessary government and other third-party approvals and
consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables
or payables between Company and its shareholders or affiliates and Company
shall not have any liabilities, including indebtedness, guaranties and
capital leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an
additional insured on their liability insurance program in accordance with
SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working
<PAGE>
capital of Company since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Company and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pentegra contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Company shall have received all documents, duly
executed in form satisfactory to Company and its counsel, referred to in
SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days
after requested by Pentegra, Company and Shareholders shall deliver to
Pentegra the following, all of which shall be in a form satisfactory to
counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel
for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or
letter agreement in form and substance mutually acceptable to the parties
hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
<PAGE>
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of Company
authorizing the execution, delivery and performance of this Agreement, the
Service Agreement, the Employment Agreements and all related documents and
agreements each certified by the Secretary as being true and correct copies
of the original thereof;
(d) executed merger certificate and/or plan as required by
applicable state law;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra and the original stock certificates
together with blank stock powers representing the outstanding shares of
Company common stock;
(f) certificates of the Shareholders and a duly authorized officer
of Company dated as of the Closing Date, (i) as to the truth and correctness
of the representations and warranties of Company and Shareholder contained
herein; (ii) as to the performance of and compliance by Company and
Shareholder with all covenants contained herein; and (iii) certifying that
all conditions precedent of Company and Shareholders to the Closing have been
satisfied;
(g) a certificate of the Secretary of Company certifying as to the
incumbency of the directors and officers of Company and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Company;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Company and any state of required
foreign qualification of Company establishing that Company is in existence
and is in good standing to transact business in its state of incorporation;
(i) an opinion of counsel to Company and Shareholder opining as to
the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Company, the enforceability of this Agreement and the other agreements and
documents to be executed in connection herewith, and other matters reasonably
requested by Pentegra;
(j) non-foreign affidavits executed by Company;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Company and Shareholders, the following, all of which shall
be in a form satisfactory to counsel to Company and Shareholders and shall be
held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending
Closing, pursuant to an escrow agreement or letter agreement in form and
substance mutually acceptable to the parties hereto:
(a) the Merger Consideration;
<PAGE>
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Company;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Company;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Company to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit attached hereto, any agreement executed pursuant hereto, and
any certificate executed and delivered by any party pursuant to the terms of
this Agreement, shall constitute representations and warranties of Company
and Shareholders, jointly and severally, or of Pentegra, as the case may be.
All such representations and warranties, and all representations and
warranties expressly labeled as such in this Agreement shall survive the date
of this Agreement and the Closing Date for a period of five (5) years
following the Closing Date, except that (i) the representations and
warranties with respect to environmental and medical waste laws and health
care laws and matters shall survive for a period of fifteen (15) years and
tax representations shall survive until one year after the expiration of the
applicable statute of limitations. Each party covenants with the other
parties not to make any claim with respect to such representations and
warranties, against any party after the date on which such survival period
shall terminate. No party shall be entitled to claim indemnity from any
other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has
timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the
case may be. Each party hereby releases, acquits and discharges the other
party from any and all claims and demands, actions and causes of action,
damages, costs, expenses and rights of setoff with respect to which the
notices required by SECTION 10.2, 10.3 or 10.4, as
<PAGE>
applicable, are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH
OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS
SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED
PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES,
ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED
TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM
OR BY REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR
TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION
10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND
SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS,
DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING,
INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT
APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST
ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS,
DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
<PAGE>
HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO
BE FURNISHED BY INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR
AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL
LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION
ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS
RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER
THE CLOSING DATE,
(E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY
RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A
RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH
THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS
SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS
SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE
REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO
MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
<PAGE>
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the
defense of such action or proceeding, such Indemnified Person shall notify
Indemnitor thereof. If any such action or other proceeding shall be brought
against any Indemnified Person, Indemnitor shall, upon written notice given
within a reasonable time following receipt by Indemnitor of such notice from
Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Company or any Shareholder giving
rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra
shall be entitled to offset the amount of damages incurred by it as a result
of such breach of warranty, representation, covenant or agreement against any
amounts payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Company
or any Shareholder contained in this Agreement or in any certificate or other
document executed and delivered by Company or any Shareholder pursuant to
this Agreement is or becomes untrue or breached in any material respect or if
Company or any Shareholder fails to comply in any material respect with any
covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
(c) at any time by Company or any Shareholder if any representation or
warranty of Pentegra contained in this Agreement or in any certificate or
other document executed and delivered by Pentegra pursuant to this Agreement
is or becomes untrue or breached in any material respect or if Pentegra fails
to comply in any material respect with any covenant or agreement contained
herein and such misrepresentation, noncompliance or breach is not cured,
waived or eliminated within twenty (20) days after receipt of written notice
thereof;
(d) by Pentegra, Shareholders or Company if the transaction contemplated
hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Company, that such termination is
<PAGE>
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares
of Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer
shall be treated as effective for any purpose or (b) engage in any
transaction, whether or not with respect to any shares of Pentegra Common
Stock or any interest therein, the intent or effect of which is to reduce the
risk of owning shares of Pentegra Common Stock. The certificates evidencing
the Pentegra Common Stock delivered to Company pursuant to the terms hereof
will bear a legend substantially in the form set forth below and containing
such other information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the
shares of Pentegra Common Stock to be delivered to Company pursuant to this
Agreement have not been and will not be registered under the Securities Act
of 1933 and may not be resold without compliance with the Securities Act of
1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to
this Agreement is being acquired solely for its own account, for investment
purposes only and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution. Each
Shareholder covenants, warrants and represents that none of the shares of
Pentegra Common Stock issued to it will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the Securities Act, as
amended, and the rules and regulations of the Securities Exchange Commission
and applicable state securities laws and regulations. All certificates
evidencing shares of Pentegra Common Stock shall bear the following legend in
addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock
shall bear any legend required by the securities or blue sky laws of any
state where Company resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the
economic risk of an investment in Pentegra Common Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and
have such knowledge and experience in financial and business matters that
they are capable of evaluating the merits and risks of the proposed
investment and therefore have the capacity to protect their own interests in
connection with the acquisition of the Pentegra Common Stock. Shareholders
and their representatives have had an adequate opportunity to ask questions
and receive answers from the officers of Pentegra concerning any and all
matters relating to the background and experience of the officers
<PAGE>
and directors of Pentegra, the plans for the operations of the business of
Pentegra, and any plans for additional acquisitions and the like.
Shareholders and their representatives have asked any and all questions in
the nature described in the preceding sentence and all questions have been
answered to their satisfaction. Shareholders are "accredited investors" as
defined in Regulation D of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Company and Shareholders agree that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally
through no fault of Company or Shareholders, (ii) disclosure is required by
law or the order of any governmental authority under color of law, provided,
that prior to disclosing any information pursuant to this clause (ii),
Company and Shareholders shall, if possible, give prior written notice
thereof to the other parties hereto, and provide such other parties hereto
with the opportunity to contest such disclosure, (iii) Company and
Shareholders reasonably believe that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party, or
(iv) Company and Shareholders are the sole and exclusive owner of such
confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Company or Shareholders of the provisions of this SECTION 13, Pentegra shall
be entitled to an injunction restraining Company and Shareholders from
disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Pentegra from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. The obligations of the parties under this SECTION 13 shall
survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement will qualify as a reorganization within the meaning of
Section 368(a) of the Code. The tax returns (and schedules thereto) of
Shareholders, Company and Pentegra shall be filed in a manner consistent
with such intention and Shareholders and Pentegra shall each provide the
other with such tax information, reports, returns or schedules as may be
reasonably required to assist the other in so reporting the transactions
contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
<PAGE>
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Company and Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Company or any Shareholder for services
rendered in connection with negotiating and closing the transactions
contemplated by this Agreement or the documents to be executed in connection
herewith, whether or not such costs or expenses are incurred before or after
the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Company.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
<PAGE>
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one and the
same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Company, be relieved from its obligations
to Company under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Company, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Company and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Company or may demand from Company, and Company agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Companys or Shareholders (hereinafter referred to as a "Party"), whether made
before or after the institution of any legal proceeding, any dispute among
the parties hereto in any way arising out of, related to, or in connection
with this Agreement (hereinafter a "Dispute"), shall be resolved by binding
arbitration in accordance with the terms of this Section (hereinafter the
"Arbitration Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
<PAGE>
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or foreclosing upon any
personal property in which there has been granted a security interest or lien
by a Party in the Documents. In Disputes involving indebtedness or other
monetary obligations, each Party agrees that the other Party may proceed
against all liable persons, jointly and severally against one or more of
them, without impairing rights against other liable persons. Nor shall a
Party be required to join the principal obligor or any other liable persons
(e.g., sureties or guarantors) in any proceeding against a particular person.
A Party may release or settle with one or more liable persons as the Party
deems fit without releasing or impairing rights to proceed against any
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoeniz,
Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the
<PAGE>
ordinary course of business of the Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
BRIAN K. KNIFF, D.D.S., P.C.
By: /s/ Brian K. Kniff, D.D.S.
----------------------------------------
Its: President
----------------------------------------
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
----------------------------------------
Its: Senior VP
----------------------------------------
/s/ Brian K. Kniff, D.D.S.
--------------------------------------------
Brian K. Kniff, D.D.S.
/s/ Gordon Ledingham, D.D.S.
--------------------------------------------
Gordon Ledingham, D.D.S.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
Annex I Merger Consideration
A Target Companies
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment
Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
4.16 Excluded Assets and Excluded Liabilities
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
LAKEVIEW DENTAL, P.C.
and
KEVIN GASSER, D.D.S.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1. TERMS OF THE REORGANIZATION
1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . . . . 2
1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 4
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 9
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 12
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 13
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 13
Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 14
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 14
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 14
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 14
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 14
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 15
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 15
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 15
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . . . . 15
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 17
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . . . 18
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 19
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 20
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 21
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . . . 22
14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . 22
14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . 23
14.12 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.13 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.14 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.15 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.16 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and
executed effective August 20, 1997, is by and among PENTEGRA DENTAL GROUP,
INC., a Delaware corporation ("Pentegra"), LAKEVIEW DENTAL, P.C., an Arizona
professional corporation ("Company") and KEVIN GASSER, D.D.S., shareholder of
Company (referred to herein as "Shareholder" or "Shareholders").
WITNESSETH:
WHEREAS, Company operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, the Boards of Directors of the Company and Pentegra have
determined that a reorganization between each of them is in the best
interests of their respective companies;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Company, the "Target Companies")
and simultaneously with the closing of the reorganization contemplated
herein, intends to consummate its initial public offering ("Initial Public
Offering") of shares of its common stock, par value $.01 per share ("Pentegra
Common Stock");
WHEREAS, it is intended for Federal income tax purposes that the
reorganization contemplated by this Agreement shall qualify as an
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE REORGANIZATION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.2 MERGER. Subject to and upon the terms and conditions contained
herein, on the Closing Date, the Company shall be merged with and into
Pentegra (or its designated affiliate, in which case, the references herein
to Pentegra shall be to such designated affiliate and its shares of common
stock) in accordance with this Agreement and the separate corporate existence
of the Company shall thereupon cease
<PAGE>
("Merger"). Pentegra shall be the surviving corporation in the Merger
("Surviving Corporation") and shall continue to be governed by the laws of
the State of Delaware and the separate corporate existence of Pentegra with
all rights, privileges, powers, immunities and purposes shall continue
unaffected by the Merger. The Merger shall have the effects specified in the
Delaware General Corporation Law and the Arizona Business Corporation Law.
If all the conditions to the Merger set forth herein shall have been
fulfilled or waived in accordance herewith and this Agreement shall not have
been terminated in accordance herewith, the parties hereto shall cause to be
properly executed and filed on the Closing Date Certificates of Merger for
the Company meeting the applicable legal requirements. The Mergers shall
become effective on the Closing Date or the filing of such documents, in
accordance with applicable law, or at such later time as the parties hereto
have agreed upon and designated in such merger filings.
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of
Incorporation and Bylaws of Pentegra shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation until duly amended in
accordance with their terms.
1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra
immediately prior to the effective date of the Merger shall be the directors
of the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal
in accordance with the Surviving Corporation's Certificate of Incorporation
and Bylaws. The persons who are officers of Pentegra immediately prior to
the effective date of the Merger shall be the officers of the Surviving
Corporation and shall hold their respective offices until their successors
have been duly elected or appointed and qualified or until their earlier
death, resignation or removal.
1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and
without any action on the part of the holder thereof, all shares of the
Company's common stock issued and outstanding on the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired and
shall cease to exist, and each holder of a certificate of representing shares
of Company common stock shall thereafter cease to have any rights with
respect to such shares except the right to receive the consideration set
forth on ANNEX I attached hereto (the "Merger Consideration"). Each share
of common stock of the Company held in treasury at the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired
without payment of any consideration therefor. On the effective date of the
Merger, each share of Pentegra Common Stock issued and outstanding shall, by
virtue of he Mergers, and without any action on the part of the holder
thereof, continue unchanged and remain outstanding as a share of validly
issued, fully paid and nonassessable share of Surviving Corporation common
stock.
1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the
Merger, the Shareholders, as the holders of a certificate or certificates
representing shares of Company common stock shall, upon surrender of such
certificate or certificates, receive the Merger Consideration, and until the
certificate or certificates of Company common stock shall have been
surrendered by the Shareholder and replaced by a certificate or certificates
representing Pentegra Common Stock (as set forth on ANNEX I), the certificate
or certificates of Company common stock shall, for all purposes be deemed to
evidence ownership of the number of shares of Pentegra Common Stock
determined in accordance with the provisions of ANNEX I. All shares of
Pentegra Common Stock issuable to the Shareholders in the Merger shall be
deemed for all purposes to have been issued by Pentegra on the Closing Date.
The Shareholders shall deliver to Pentegra at Closing the certificate or
certificates representing the Company common stock owned by them, duly
endorsed in blank by the Shareholders, or accompanied by duly executed blank
stock powers, and with all necessary transfer tax and other revenue stamps,
acquired at the Shareholder's expense, affixed and cancelled.
1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date,
Pentegra shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in Pentegra its
right, title or interest in, to or under
<PAGE>
any of the Assets or otherwise to carry out this Agreement, in return for the
consideration set forth in this Agreement, the Company and Shareholders shall
excecute and deliver all such deeds, bills of sale, assignments and
assurances and take and do all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under the Assets in Pentegra or otherwise to carry
out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional
corporation or association, as applicable, duly organized, validly existing
and in good standing under the laws of the State of Arizona. Company has all
necessary corporate powers to own all of its assets and to carry on its
business as such business is now being conducted. Company does not own stock
in or control, directly or indirectly, any other corporation, association or
business organization, nor is Company a party to any joint venture or
partnership. The Shareholders are the sole shareholders of Company and own
all outstanding shares of capital stock free of all security interests,
claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each
share of Company's common stock has been legally and validly issued and fully
paid and nonassessable. No shares of capital stock of Company are owned by
Company in treasury. There are no outstanding (a) bonds, debentures, notes or
other obligations the holders of which have the right to vote with the
stockholders of Company on any matter, (b) securities of Company convertible
into equity interests in Company, or (c) commitments, options, rights or
warrants to issue any such equity interests in Company, to issue securities
of Company convertible into such equity interests, or to redeem any
securities of Company. No shares of capital stock of Company have been
issued or disposed of in violation of the preemptive rights, rights of first
refusal or similar rights of any of Company's stockholders. Company is not
required to qualify to do business as a foreign corporation in any other
state or jurisdiction by reason of its business, properties or activities in
or relating to such other state or jurisdiction. Company does not have any
assets, employees or offices in any state other than the state set forth in
the first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate
power to execute, deliver and perform this Agreement and all agreements and
other documents executed and delivered by it pursuant to this Agreement or to
be executed and delivered on the Closing Date, and has taken all action
required by law, its Articles or Certificate of Incorporation, its Bylaws or
otherwise, to authorize the execution, delivery and performance of this
Agreement and such related documents. Each Shareholder has the legal
capacity to enter into and perform this Agreement and the other agreements to
be executed and delivered in connection herewith. Company has obtained the
approval of its stockholders necessary to the consummation of the
transactions contemplated herein. This Agreement and all agreements and
documents executed and delivered in connection herewith have been, or will be
as of the Closing Date, duly executed and delivered by Company and
Shareholders, as appropriate, and constitute or will constitute the legal,
valid and binding obligations of Company and Shareholders, enforceable
against Company and Shareholders in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of
consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, violate any provision of the Articles or
Certificate of Incorporation or Bylaws of Company or any provisions of, or
result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or
decree to which Company or any Shareholder is a party or by which Company or
any Shareholder is bound, or violate any material restrictions of any kind to
which Company is subject, or result in any lien or encumbrance on any of
Company's assets or the Assets.
<PAGE>
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to
the knowledge of Company and Shareholders, threatened, which may result in
the revocation, cancellation or suspension, or any adverse modification, of
any such licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Company or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or
dividend of any kind has been declared or paid by Company on any of its
capital stock since the Balance Sheet Date. No repurchase of any of
Company's capital stock has been approved, effected or is pending, or is
contemplated by Company.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Company and all
amendments thereto have been delivered to Pentegra. The minute books of
Company contain accurate minutes of all meetings of and consents to actions
taken without meetings of the Board of Directors and stockholders of Company
since its formation. The books of account of Company have been kept
accurately in the ordinary course of business and the revenues, expenses,
assets and liabilities of Company have been properly recorded in such books.
2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any
related unaudited statements of income, retained earnings, schedule of
accounts receivable, accounts payable and accrued liabilities, and cash flows
for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Company as of
the dates and for the periods indicated and reflect all fixed and contingent
liabilities of Company.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all
leases pursuant to which Company or any Shareholder leases, as lessor or
lessee, real or personal property used in operating the Business, related to
the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and
enforceable in accordance with their respective terms, and there is not under
any such lease any existing default by Company, as lessor or lessee, or any
condition or event of which any Shareholder or Company has knowledge which
with notice or lapse of time, or both, would constitute a default, in respect
of which Company or Shareholders have not taken adequate steps to cure such
default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Company and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances
set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to
<PAGE>
the Closing Date and evidence of such releases of liens and claims shall be
provided to Pentegra on the Closing Date and the Assets shall not be used to
satisfy such liens, claims or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Company, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on
EXHIBIT 2.12, Company has no right, title or interest in or to patents,
patent rights, corporate names, assumed names, manufacturing processes, trade
names, trademarks, service marks, inventions, specialized treatment
protocols, copyrights, formulas and trade secrets or similar items. Set
forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies
of Company, including the names of any entities from whom Company previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Company in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Company has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the name of each director and officer of Company
and the offices held by each, (b) the most recent payroll report of Company,
showing all current employees of Company and their current levels of
compensation, (c) promised increases in compensation of employees of Company
that have not yet been effected, (d) oral or written employment agreements,
consulting agreements or independent contractor agreements (and all
amendments thereto) to which Company is a party, copies of which have been
delivered to Pentegra, and (e) all employee manuals, materials, policies,
procedures and work-related rules, copies of which have been delivered to
Pentegra. Company is in compliance with all applicable laws, rules,
regulations and ordinances respecting employment and employment practices.
Company has not engaged in any unfair labor practice. There are no unfair
labor practices charges or complaints pending or threatened against Company,
and Company has never been a party to any agreement with any union, labor
organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the
Business nor any of the Assets is subject to any pending, nor does Company or
any Shareholder have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Company, any Shareholder, the Business, the Assets or the
transactions contemplated by this Agreement, and, to the knowledge of Company
and Shareholders, no basis for any such action exists, nor is there any legal
impediment of which Company or any Shareholder has knowledge to the continued
operation of its business or the use of the Assets in the ordinary course,
subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Company has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Company ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted or may be made
by any party thereto. Except as indicated on such Exhibits, there is not
under any such Contract any existing default
<PAGE>
by Company or any Shareholder, or any condition or event of which Company or
any Shareholder has knowledge which with notice or lapse of time, or both,
would constitute a default. Company and Shareholders have no knowledge of
any default by any other party to such Contracts. Company and Shareholders
have not received notice of the intention of any party to any Contract to
cancel or terminate any Contract and have no reason to believe that any
amendment or change to any Contract is contemplated by any party thereto.
Other than those contracts, obligations and commitments listed on EXHIBIT
2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material
written or oral agreement contract, lease or arrangement, including without
limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or
arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as
lessor or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
the Company or Shareholders, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Company on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16,
Company has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
<PAGE>
(d) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Company since the Balance Sheet
Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(j) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not
covered by insurance) materially and adversely affecting any of its
properties, assets or business or the Business or the Assets, or experienced
any other material adverse change in its financial condition, assets,
prospects, liabilities or business;
(n) Declared or paid a distribution, payment or dividend of any
kind on the capital stock of Company;
(o) Repurchased, approved any repurchase or agreed to repurchase
any of Company's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Company has filed all tax returns (including tax
reports and other statements) required to have been filed by it, and has paid
all taxes (including any interest, penalty or additions thereto) required to
have been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Company has not received any notice that any tax deficiency or
delinquency has been or may be asserted against Company. There are no
audits relating to taxes of Company pending or in process or, to the
knowledge of Company, threatened. Company is not currently the beneficiary of
any waiver of any statute of limitations in respect of taxes nor of any
extension of time within which to file any tax return or to pay any tax
assessment or deficiency. There are no liens or encumbrances relating to
taxes on or threatened against any of the assets of Company. Company has
withheld
<PAGE>
and paid all taxes required by law to have been withheld and paid by it.
Neither Company nor any predecessor of Company is or has been a party to any
tax allocation or sharing agreement or a member of an affiliated group of
corporations filing a consolidated Federal income tax return. Company has
delivered to Pentegra correct and complete copies of Company's three most
recently filed annual state, local and Federal income tax returns, together
with all examination reports and statements of deficiencies assessed against
or agreed to by Company during the three calendar year period preceding the
date of this Agreement. Company has neither made any payments, is obligated
to make any payments, or is a party to any agreement that under any
circumstance could obligate it to make any payments that will not be
deductible under Code section 280G.
(b) No Shareholder presently intends to dispose of any of the shares of
Pentegra Common Stock to be received hereunder nor is a party to any plan,
arrangement or agreement for the disposition of such shares. Company and
Shareholders have no knowledge, after due inquiry, of any such intent, plan,
arrangement or agreement by any Shareholder. Nothing contained herein shall
prohibit Shareholders from selling such shares of Pentegra Common Stock after
the designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage
commissions or finder's or similar fees in connection with the transactions
contemplated by this Agreement which may be now or hereafter asserted against
Pentegra, Company or Company's shareholders resulting from any action taken
by Company or any Shareholder or their respective agents or employees, or any
of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Company did not have, as of the Balance Sheet
Date, and has not incurred since that date and will not have incurred as of
the Closing Date, any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
other than those incurred in the ordinary course of business or as set forth
on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable
grounds to know, of any basis for the assertion against Company or any
Shareholder as of the Balance Sheet Date, of any claim or liability of any
nature in any amount not fully reflected or reserved against on the Balance
Sheet, or of any claim or liability of any nature arising since that date
other than those incurred in the ordinary course of business or contemplated
by this Agreement. All indebtedness of Company (including without
limitation, indebtedness for borrowed money, guaranties and capital lease
obligations) is described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed
professional of Company carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the
industry. Valid and enforceable policies in such amounts are outstanding and
duly in force and will remain duly in force through the Closing Date. All
such policies are described in EXHIBIT 2.20 attached hereto and true and
correct copies have been delivered to Pentegra. Neither Shareholders nor
Company have not received notice or other communication from the issuer of
any such insurance policy cancelling or amending such policy or threatening
to do so. Neither Company, nor any Shareholder nor any licensed professional
employee of Company has any outstanding claims, settlements or premiums owed
against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Company has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company
<PAGE>
Plan," and collectively "Company Plans") have been operated and administered
in all material respects in accordance with all applicable laws, rules and
regulations, including without limitation, ERISA, the Internal Revenue Code
of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment
Act of 1967, as amended, and the related rules and regulations adopted by
those Federal agencies responsible for the administration of such laws. No
act or failure to act by Company has resulted in a "prohibited transaction"
(as defined in ERISA) with respect to the Company Plans. No "reportable
event" (as defined in ERISA) has occurred with respect to any of the Company
Plans. Company has not previously made, is not currently making, and is not
obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Company Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at least equal to the
value of plan liabilities or (ii) the value of plan liabilities in excess of
plan assets is disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Company, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and
Company's licensed professional employees, and the conduct of the Business
and use of the Assets, have complied with all applicable laws, rules,
regulations and licensing requirements, including, without limitation, the
Federal Environmental Protection Act, the Occupational Safety and Health Act,
the Americans with Disabilities Act and any environmental laws and medical
waste laws, and there exist no violations by Company, any Shareholder or any
licensed professional employee of Company of any Federal, state or local law
or regulation. Company and Shareholders have not received any notice of a
violation of any Federal, state and local laws, regulations and ordinances
relating to the operations of the Business and Assets and no notice of any
pending inspection or violation of any such law, regulation or ordinance has
been received by Company.
2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed
professional employee or independent contractor of Company has timely filed
all claims or other reports required to be filed with respect to the purchase
of services by third-party payors, and all such claims or reports are
complete and accurate, and has no liability to any payor with respect
thereto. There are no pending appeals, overpayment determinations,
adjustments, challenges, audit, litigation or notices of intent to open
Medicare or Medicaid claim determinations or other reports required to be
filed by Company, any Shareholder and each licensed professional employee of
Company. Neither Company, nor any Shareholder, nor any licensed professional
employee of Company has been convicted of, or pled guilty or nolo contendere
to, patient abuse or negligence, or any other Medicare or Medicaid program
related offense and none has committed any offense which may serve as the
basis for suspension or exclusion from the Medicare and Medicaid programs or
any other third party payor program. With respect to payors, Company,
Shareholders and Company's licensed professional employees has not (a)
knowingly and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Company or Shareholders in this Agreement, and no Exhibit or certificate
issued or executed by, or information furnished by, officers or directors of
Company or any Shareholder and furnished or to be furnished to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a
<PAGE>
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Company has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No
officer, employee, director or stockholder of Company, or their respective
spouses, children or affiliates, owns directly or indirectly, on an
individual or joint basis, any interest in, has a compensation or other
financial arrangement with, or serves as an officer or director of, any
customer or supplier or competitor of Company or any organization that has a
material contract or arrangement with Company.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Company's services which
accounted for more than 10% of revenues of Company in the preceding fiscal
year. Company has good relations with all such payors and other material
payors of Company and none of such payors has notified Company that it
intends to discontinue its relationship with Company or to deny any claims
submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Company and Shareholders as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon
<PAGE>
Pentegra. Other than as would not have a material adverse effect, there are
no proceedings pending or, to the knowledge of Pentegra, threatened, which
may result in the revocation, cancellation or suspension, or any adverse
modification, of any such licenses or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has knowledge to the continued operation of its business or the use
of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the reorganization contemplated
hereby will be as of the Closing Date duly and validly authorized by all
necessary corporate action on the part of Pentegra. The Pentegra Common
Stock to be issued in connection with the reorganization contemplated hereby,
when issued in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Company or any
Shareholder pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, agree that between the
date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders
shall use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Company
and Shareholders agree to complete the Exhibits hereto to be provided by them
in form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the
Business and use the Assets in the ordinary course. Company and Shareholders
shall not enter into any lease, contract, indebtedness, commitment, purchase
or sale or acquire or dispose of any capital asset relating to the Business
or the Assets except in the ordinary course of business. Company and
Shareholders shall use their best efforts to preserve the Business and Assets
intact and shall not take any action that would have an adverse effect on the
Business or Assets. Company and Shareholders shall use their best efforts to
preserve intact the
<PAGE>
relationships with payors, customers, suppliers, patients and others having
significant business relations with Company. Company and Shareholders shall
collect its receivables and pay its trade payables in the ordinary course of
business. Company and Shareholdes shall not introduce any new method of
management, operations or accounting.
4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra
and its authorized representatives access to, and make available for
inspection, all of the assets and business of Company, the Business and the
Assets, including employees, customers and suppliers and permit Pentegra and
its authorized representatives to inspect and make copies of all documents,
records and information with respect to the business or assets of Company,
the Business or the Assets as Pentegra or its representatives may request.
Company and Shareholders shall promptly notify Pentegra in writing of (a) any
notice or communication relating to a default or event that, with notice or
lapse of time or both, could become a default, under any contract, commitment
or obligation to which Company is a party or relating to the Business or the
Assets, and (b) any adverse change in Company's or the Business' financial
condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and
Shareholders shall use their best efforts to secure all necessary approvals
and consents of third parties to the consummation of the transactions
contemplated hereby, including consents described on EXHIBIT 2.4. Company
and Shareholders shall use their best efforts to obtain all licenses,
permits, approvals or other authorizations required under any law, rule,
regulation, or otherwise to provide the services of the Practice contemplated
by the Service Agreement and to conduct the intended business of the Practice
and operate the Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance
with the provisions hereof, Company and Shareholders shall not, and shall use
its best efforts to cause Company's employees, agents and representatives not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or
the making or implementation of any proposal or offer, including without
limitation, any proposal or offer to any Shareholder, with respect to a
merger, acquisition, consolidation or similar transaction involving, or the
purchase of all or any significant portion of the assets or any equity
securities of Company or engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person relating to such proposal or offer, and Company and Shareholders will
immediately cease any such activities, discussions or negotiations heretofore
conducted with respect to any of the foregoing. Company and Shareholders
shall immediately notify Pentegra if any such inquiries or proposals are
received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Company or any entity might have any liability whatsoever
arising from any insurance, pension plan, employment tax or similar
liability of Company to any employee or other person or entity (including,
without limitation, any Company Plan and any liability under employment
contracts with Company) allocable to services performed prior to the Closing
Date. Company and Shareholders acknowledge that the purpose and intent of
this covenant is to assure that Pentegra shall have no unfunded liability
whatsoever at any time after the Closing Date with respect to any of
Company's employees or similar persons or entities, including, without
limitation, any Company Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Company shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash
compensation of any Shareholder (other than in the ordinary course of
business) or other employee or an independent contractor of Company, adopt,
amend or terminate any compensation plan, employment agreement, independent
contractor agreement, employee policies and procedures or employee benefit
plan, take any action that could deplete the assets of any employee benefit,
or fail to pay any premium or contribution due or file any report with
respect to any employee benefit plan, or take any other actions with respect
to its employees or employee matters which might have an adverse effect
<PAGE>
upon Company, its business, assets or prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or
dividend of any kind will be declared or paid by Company, nor will any
repurchase of any of Company's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders
shall use their best efforts to take, or cause to be taken, all actions
necessary to effect the reorganization contemplated hereby under applicable
law.
4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not
change in any material respect the tax or financial accounting methods or
practices followed by Company (including any material change in any
assumption underlying, or any method of calculating, any bad debt,
contingency or other reserve), except as may be required by law or generally
accepted accounting principles. Company and Shareholders will duly,
accurately and timely (without regard to any extensions of time) file all
returns, information statements and other documents relating to taxes of
Company required to be filed by it, and pay all taxes required to be paid by
it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Company hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Company and Shareholders covenant and agree that all of the
creditors with respect to the Business and the Assets will be paid in full by
Company prior to the Closing Date, except to extent that any liability to
such creditors is assumed by Pentegra pursuant to this Agreement. If
required by Pentegra, Company and Shareholders shall furnish Pentegra with
proof of payment of all creditors with respect to the Business and the
Assets. Notwithstanding the foregoing, Company and Shareholders may dispute
the validity or amount of any such creditor's claim without being deemed to
be in violation of this SECTION 4.11, provided that such dispute is in good
faith and does not unreasonably delay the resolution of the claim and
provided, further that Company and Shareholders agree to indemnify and bond
Pentegra for such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Company leases any of its premises from any Shareholder
or other affiliate of Company or any shareholder of Company, Pentegra shall
have entered into a building lease (the "Building Lease") with the owner of
such premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, (i) a five year
initial term plus three five-year renewal options, (ii) a lease rate equal to
the fair market value lease rate, as agreed to by Pentegra, and (iii) such
other provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with
all requests made by Pentegra for the purpose of allowing Pentegra to hire
those non-dentist employees of Company designated by Pentegra, such
employment to be effective as of the Closing Date. Notwithstanding the
above, Company and Shareholders shall remain liable under any Company Plans
for any claims incurred by any employees or their spouses or dependents, and
for all compensation, bonuses, benefits and other such items and other
liabilities related to Company's employees incurred by Company prior to the
Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all
employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall
be treated as "leased employees" (as defined in Code Section 414(n)) of
Company and shall be treated as Clinic employees for purposes of eligibility
and participation in Company Plans.
4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective
as of the Closing Date.
<PAGE>
4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a
limited liability company, partnership or other legal entity (the "Practice")
approved by Pentegra for the purpose of practicing dentistry and entering
into the Service Agreement. The Practice shall be duly organized, in
existing and in good standing under the laws of the State in which the
practice of dentistry is conducted by the Shareholders and the Practice. The
Practice shall have all necessary power to own all of its assets and to carry
on its business as such business is now being conducted. The Shareholders
shall be the sole member/shareholder/partner of the Practice and own all such
interests free of all security interests, claims, encumbrances and liens.
Each interest in the Practice shall be legally and validly issued and fully
paid and nonassessable. There shall be no outstanding (a) bonds, debentures,
notes or other obligations the holders of which have the right to vote with
the members/partners/shareholders of the Practice on any matter, (b)
securities of the Practice convertible into equity interests in the Practice,
or (c) commitments, options, rights or warrants to issue any such equity
interests in the Practice, to issue securities of the Practice convertible
into such equity interests, or to redeem any securities of the Practice. No
interests of the Practice shall have been issued or disposed of in violation
of the preemptive rights, rights of first refusal or similar rights of any of
the Practice's members/partners/shareholders. The Practice shall quality to
do business as a foreign entity in any other state or jurisdiction by reason
of its business, properties or activities in or relating to such other state
or jurisdiction. The Company shall have transferred the Excluded Assets set
forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to
assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for
equity interest in the Practice, and the Company shall have distributed such
equity interests in the Practice to the Shareholders.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation,
Bylaws/Regulations and minutes of the Practice and all amendments thereto of
the Practice shall have been delivered to Pentegra and shall be in form and
substance satisfactory to Pentegra. The minute books of the Practice shall
contain all accurate minutes of the meetings of and consents to actions taken
without meetings of the members\managers/partners/board of directors of the
Practice since its formation. The books of account of the Practice shall
have been kept accurately in the ordinary course of business and the
revenues, expenses, assets and liabilities of the Practice shall have been
properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements
and other documents to be executed and delivered by it pursuant to this
Agreement, including without limitation, the Service Agreement and each
Employment Agreement or to be executed and delivered on the Closing Date, and
has taken all action required by law, its Organization/Partnership
Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to
authorize the execution, delivery and performance of such documents. The
Service Agreement, the Employment Agreement and the other agreements
contemplated hereby shall have been duly executed and delivered by the
Practice and constitute or will constitute the legal, valid and binding
obligations of the Practice enforceable against the Practice in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of the
Service Agreement, the Employment Agreements and the other agreements
contemplated hereby will not violate any provision of the organizational
documents of the Practice or any provisions of, or result in the acceleration
of, any obligation under any mortgage, lien, lease, agreement, rent,
instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any
material restrictions of any kind to which the Practice is subject, or result
in any lien or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
<PAGE>
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and have filed with the
proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS.
Pentegra, Shareholders and Company agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall
cooperate to promptly prepare and file with the Securities Exchange Commission
("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to
be filed by Pentegra in connection with its Initial Public Offering (including
the prospectus constituting a part thereof, the "Registration Statement").
Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits
and approvals required to carry out the transactions contemplated by this
Agreement and the Company and Shareholders shall furnish all information
concerning Company and Shareholders as may be reasonable requested in connection
with any such action.
Company and Shareholder represent and warrant that none of the information
or documents supplied or to be supplied by it specifically for inclusion in the
Registration Statement, by exhibit or otherwise, will, at the time the
Registration Statement and each amendment or supplement thereto, if any, becomes
effective under the Securities Act of 1933, 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, in light of the circumstances under
which they were made, not misleading. Company and Shareholders shall be
entitled to review the Registration Statement and each amendment thereto, if
any, prior to the time each becomes effective under the Securities Act of 1933.
Company and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by Pentegra
in connection with the preparation of the Registration Statement and each
amendment or supplement thereto, or any other statement, filing, notice or
application made by or on behalf of each such party or any of its subsidiaries
to any governmental entity in connection with the transactions contemplated by
the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at or
prior to the Closing of each of the following conditions:
<PAGE>
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Company and Shareholders contained herein shall have been true and correct in
all respects when initially made and shall be true and correct in all respects
as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Company and Shareholders prior to
the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Company shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Company, the Business and the Assets, the results of which shall
be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service Agreement"),
in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which
Pentegra will provide management services to the Practice. Each Shareholder
shall have executed and delivered a Guaranty Agreement in substantially the form
attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder
shall, among other things, guaranty the obligations of the Practice under the
Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused
each shareholder of Company that has an existing employment agreement with
Company to have terminated his or her employment agreement with Company and
shall have executed an employment agreement ("Employment Agreement") with the
Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise
satisfactory to Company and Pentegra.
7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained
all necessary government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly
executed in form satisfactory to Pentegra and its counsel, referred to in
SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or
payables between Company and its shareholders or affiliates and Company shall
not have any liabilities, including indebtedness, guaranties and capital leases,
that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an
additional insured on their liability insurance program in accordance with
SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working
<PAGE>
capital of Company since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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.
At or prior to the date that the Registration Statement is declared effective by
the SEC, Pentegra shall have received all state securities and "Blue Sky"
permits necessary to consummate the transactions contemplated hereby. The
Pentegra Common Stock shall have been approved for listing on Nasdaq or other
exchange selected by Pentegra, subject only to official notification of
issuance.
SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Company and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Pentegra contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Company shall have received all documents, duly
executed in form satisfactory to Company and its counsel, referred to in SECTION
9.2.
8.5 SECURITIES APPROVAL. 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.
At or prior to the date that the Registration Statement is declared effective by
the SEC, Pentegra shall have received all state securities and "Blue Sky"
permits necessary to consummate the transactions contemplated hereby. The
Pentegra Common Stock shall have been approved for listing on Nasdaq or other
exchange selected by Pentegra, subject only to official notification of
issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days
after requested by Pentegra, Company and Shareholders shall deliver to Pentegra
the following, all of which shall be in a form satisfactory to counsel to
Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in
escrow pending Closing, pursuant to an escrow agreement or letter agreement in
form and substance mutually acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals of
all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
<PAGE>
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of Company
authorizing the execution, delivery and performance of this Agreement, the
Service Agreement, the Employment Agreements and all related documents and
agreements each certified by the Secretary as being true and correct copies of
the original thereof;
(d) executed merger certificate and/or plan as required by applicable
state law;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra and the original stock certificates together
with blank stock powers representing the outstanding shares of Company common
stock;
(f) certificates of the Shareholders and a duly authorized officer of
Company dated as of the Closing Date, (i) as to the truth and correctness of the
representations and warranties of Company and Shareholder contained herein; (ii)
as to the performance of and compliance by Company and Shareholder with all
covenants contained herein; and (iii) certifying that all conditions precedent
of Company and Shareholders to the Closing have been satisfied;
(g) a certificate of the Secretary of Company certifying as to the
incumbency of the directors and officers of Company and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Company;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Company and any state of required
foreign qualification of Company establishing that Company is in existence and
is in good standing to transact business in its state of incorporation;
(i) an opinion of counsel to Company and Shareholder opining as to
the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Company, the enforceability of this Agreement and the other agreements and
documents to be executed in connection herewith, and other matters reasonably
requested by Pentegra;
(j) non-foreign affidavits executed by Company;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall
deliver to Company and Shareholders, the following, all of which shall be in a
form satisfactory to counsel to Company and Shareholders and shall be held by
Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing,
pursuant to an escrow agreement or letter agreement in form and substance
mutually acceptable to the parties hereto:
(a) the Merger Consideration;
<PAGE>
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance of
this Agreement and all related documents and agreements each certified by the
Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii) certifying
that all conditions precedent of Pentegra to the Closing have been satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and the
State of incorporation of Company;
(h) an opinion of counsel to Pentegra opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Pentegra, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Company;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Company to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in
any Exhibit attached hereto, any agreement executed pursuant hereto, and any
certificate executed and delivered by any party pursuant to the terms of this
Agreement, shall constitute representations and warranties of Company and
Shareholders, jointly and severally, or of Pentegra, as the case may be. All
such representations and warranties, and all representations and warranties
expressly labeled as such in this Agreement shall survive the date of this
Agreement and the Closing Date for a period of five (5) years following the
Closing Date, except that (i) the representations and warranties with respect to
environmental and medical waste laws and health care laws and matters shall
survive for a period of fifteen (15) years and tax representations shall survive
until one year after the expiration of the applicable statute of limitations.
Each party covenants with the other parties not to make any claim with respect
to such representations and warranties, against any party after the date on
which such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless
such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4
hereof, as the case may be. Each party hereby releases, acquits and discharges
the other party from any and all claims and demands, actions and causes of
action, damages, costs, expenses and rights of setoff with respect to which the
notices required by SECTION 10.2, 10.3 or 10.4, as
<PAGE>
applicable, are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2
AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS
FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS,
COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES
AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY
PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF,
OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR
TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3
AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND
SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS,
DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND
EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH
RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
<PAGE>
HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO
BE FURNISHED BY INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER
THE CLOSING DATE,
(D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS
GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING
OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO
CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY
RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A
RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE
NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND
PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS
SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION
STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR
SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED
OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS
SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
<PAGE>
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the defense
of such action or proceeding, such Indemnified Person shall notify Indemnitor
thereof. If any such action or other proceeding shall be brought against any
Indemnified Person, Indemnitor shall, upon written notice given within a
reasonable time following receipt by Indemnitor of such notice from Indemnified
Person, be entitled to assume the defense of such action or proceeding with
counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person;
provided, however, that any Indemnified Person may at its own expense retain
separate counsel to participate in such defense. Notwithstanding the foregoing,
Indemnified Person shall have the right to employ separate counsel at
Indemnitor's expense and to control its own defense of such action or proceeding
if, in the reasonable opinion of counsel to such Indemnified Person, (a) there
are or may be legal defenses available to such Indemnified Person or to other
Indemnified Persons that are different from or additional to those available to
Indemnitor and which could not be adequately advanced by counsel chosen by
Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor
and such Indemnified Person that would make such separate representation
advisable; provided, however, that in no event shall Indemnitor be required to
pay fees and expenses hereunder for more than one firm of attorneys of
Indemnified Person in any jurisdiction in any one action or proceeding or group
of related actions or proceedings. Indemnitor shall not, without the prior
written consent of any Indemnified Person, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding to which such Indemnified Person is a party unless such settlement,
compromise or consent includes an unconditional release of such Indemnified
Person from all liability arising or potentially arising from or by reason of
such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Company or any Shareholder giving rise
to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be
entitled to offset the amount of damages incurred by it as a result of such
breach of warranty, representation, covenant or agreement against any amounts
payable by Pentegra, including the amounts payable under the Service Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Company
or any Shareholder contained in this Agreement or in any certificate or other
document executed and delivered by Company or any Shareholder pursuant to this
Agreement is or becomes untrue or breached in any material respect or if Company
or any Shareholder fails to comply in any material respect with any covenant or
agreement contained herein, and any such misrepresentation, noncompliance or
breach is not cured, waived or eliminated within twenty (20) days after receipt
of written notice thereof;
(c) at any time by Company or any Shareholder if any representation or
warranty of Pentegra contained in this Agreement or in any certificate or other
document executed and delivered by Pentegra pursuant to this Agreement is or
becomes untrue or breached in any material respect or if Pentegra fails to
comply in any material respect with any covenant or agreement contained herein
and such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra, Shareholders or Company if the transaction contemplated
hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Company, that such termination is
<PAGE>
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date,
Shareholder shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of
Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer shall
be treated as effective for any purpose or (b) engage in any transaction,
whether or not with respect to any shares of Pentegra Common Stock or any
interest therein, the intent or effect of which is to reduce the risk of owning
shares of Pentegra Common Stock. The certificates evidencing the Pentegra
Common Stock delivered to Company pursuant to the terms hereof will bear a
legend substantially in the form set forth below and containing such other
information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the
shares of Pentegra Common Stock to be delivered to Company pursuant to this
Agreement have not been and will not be registered under the Securities Act of
1933 and may not be resold without compliance with the Securities Act of 1933.
The Pentegra Common Stock to be acquired by Shareholders pursuant to this
Agreement is being acquired solely for its own account, for investment purposes
only and with no present intention of distributing, selling or otherwise
disposing of it in connection with a distribution. Each Shareholder covenants,
warrants and represents that none of the shares of Pentegra Common Stock issued
to it will be offered, sold, assigned, pledged, hypothecated, transferred or
otherwise disposed of except after full compliance with all of the applicable
provisions of the Securities Act, as amended, and the rules and regulations of
the Securities Exchange Commission and applicable state securities laws and
regulations. All certificates evidencing shares of Pentegra Common Stock shall
bear the following legend in addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Company resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the
economic risk of an investment in Pentegra Common Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and
have such knowledge and experience in financial and business matters that they
are capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect their own interests in connection with
the acquisition of the Pentegra Common Stock. Shareholders and their
representatives have had an adequate opportunity to ask questions and receive
answers from the officers of Pentegra concerning any and all matters relating to
the background and experience of the officers
<PAGE>
and directors of Pentegra, the plans for the operations of the business of
Pentegra, and any plans for additional acquisitions and the like.
Shareholders and their representatives have asked any and all questions in
the nature described in the preceding sentence and all questions have been
answered to their satisfaction. Shareholders are "accredited investors" as
defined in Regulation D of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Company and Shareholders agree that it will not disclose
such confidential information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, unless (i) such information
becomes available to or known by the public generally through no fault of
Company or Shareholders, (ii) disclosure is required by law or the order of any
governmental authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (ii), Company and Shareholders shall, if
possible, give prior written notice thereof to the other parties hereto, and
provide such other parties hereto with the opportunity to contest such
disclosure, (iii) Company and Shareholders reasonably believe that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party, or (iv) Company and Shareholders are the sole and exclusive
owner of such confidential information as a result of the transactions
contemplated hereunder or otherwise. In the event of a breach or threatened
breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra
shall be entitled to an injunction restraining Company and Shareholders from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting Pentegra from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
The obligations of the parties under this SECTION 13 shall survive the
termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement will qualify as a reorganization within the meaning of Section
368(a) of the Code. The tax returns (and schedules thereto) of Shareholders,
Company and Pentegra shall be filed in a manner consistent with such intention
and Shareholders and Pentegra shall each provide the other with such tax
information, reports, returns or schedules as may be reasonably required to
assist the other in so reporting the transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery, or by
facsimile AND overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
<PAGE>
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Company and Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this Agreement,
whether or not such transactions are consummated. Without limiting the
generality of the foregoing and whether or not such liabilities may be deemed to
have been incurred in the ordinary course of business, Pentegra shall not be
liable to or required to pay, either directly or indirectly, any fees and
expenses of legal counsel, accountants, auditors or other persons or entities
retained by Company or any Shareholder for services rendered in connection with
negotiating and closing the transactions contemplated by this Agreement or the
documents to be executed in connection herewith, whether or not such costs or
expenses are incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure, either
written or oral, regarding the transactions contemplated by this Agreement
without the prior written consent of the other party, provided that the
foregoing shall not prohibit any disclosure (a) by press release, filing or
otherwise that Pentegra has determined in good faith judgment to be required by
Federal securities laws or the rules of the National Association of Securities
Dealers, (b) to attorneys, accountants, investment bankers or other agents of
the parties assisting the parties in connection with the transactions
contemplated by this Agreement, and (c) by Pentegra in connection with the
conduct of its Initial Public Offering and conducting an examination of the
operations and assets of Company.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are
integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and not
only in connection with the specific representation in which they are explicitly
referenced.
<PAGE>
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS
ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY
AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR
ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one and the same
instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any entity
that, through one or more intermediaries is, controlled, controlled by or under
common control with, Pentegra. Upon any such assignment prior to the Closing,
all references herein to Pentegra (including those to Pentegra Common Stock)
shall be deemed to include references to the assignee and the assignee's common
stock. Notwithstanding any such assignment, Pentegra shall not, absent a
written release from Company, be relieved from its obligations to Company under
this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Company, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Company and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Company or may demand from Company, and Company agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing, and
signed by the parties hereto. The waiver of any of the terms and conditions of
this Agreement shall not be construed as a waiver of any other terms and
conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Companys or Shareholders (hereinafter referred to as a "Party"), whether made
before or after the institution of any legal proceeding, any dispute among the
parties hereto in any way arising out of, related to, or in connection with
this Agreement (hereinafter a "Dispute"), shall be resolved by binding
arbitration in accordance with the terms of this Section (hereinafter the
"Arbitration Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in accordance
with the terms of this Arbitration Program, the Commercial
<PAGE>
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been completed
and the arbitrators have determined each party's post-arbitration obligations
and responsibilities as it relates to such warranties and covenants. No
provision of, nor the exercise of any rights under, this Arbitration Program
shall limit the right of any Party at any time to seek or use ancillary or
preliminary judicial or non-judicial self help remedies for the purposes of
obtaining, perfecting, preserving, or foreclosing upon any personal property in
which there has been granted a security interest or lien by a Party in the
Documents. In Disputes involving indebtedness or other monetary obligations,
each Party agrees that the other Party may proceed against all liable persons,
jointly and severally against one or more of them, without impairing rights
against other liable persons. Nor shall a Party be required to join the
principal obligor or any other liable persons (e.g., sureties or guarantors) in
any proceeding against a particular person. A Party may release or settle with
one or more liable persons as the Party deems fit without releasing or impairing
rights to proceed against any persons not so released. All statutes of
limitation that would otherwise be applicable shall apply to any arbitration
proceeding.
The party seeking arbitration shall notify the other Party, in writing, of
that Party's desire to arbitrate a dispute; and each Party shall, within twenty
(20) days from the date such notification is received, select an arbitrator, and
those two arbitrators shall select a third arbitrator within ten (10) days
thereafter. The issues or claims in dispute shall be committed to writing,
separately stated and numbered, and each party's proposed answers or contentions
shall be signed below the questions. Failure by a party to select an arbitrator
within the prescribed time period shall serve as that Party's acquiescence and
acceptance of the other party's selection of arbitrator. The arbitrators shall
resolve all Disputes in accordance with the applicable substantive law. Any
Dispute shall be decided by a majority vote of three arbitrators, unless the
claim or amount in controversy does not exceed $100,000.00, in which case a
single arbitrator (who shall have authority to render a maximum award of
$100,000.00, including all damages of any kind, costs and fees) may decide the
Dispute. The arbitrators may grant any remedy or relief that the arbitrators
deem just and equitable and within the scope of this Arbitration Program. The
arbitrators may also grant such ancillary relief as is necessary to make
effective the award. In all arbitration proceedings the arbitrators shall make
specific and written findings of fact and conclusions of law. In all
arbitration proceedings in which the amount in controversy exceeds $100,000.00,
in the aggregate, the Parties shall have in addition to the statutory right to
seek vacation or modification of any award pursuant to applicable law, the right
to seek vacation or modification of any award that is based in whole, or in
part, on an incorrect or erroneous ruling of law by appeal to an appropriate
court having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must be
filed in a court having jurisdiction over the Dispute within 15 days from the
date the award in rendered. The arbitrators' findings of fact shall be binding
on all Parties and shall not be subject to further review except as otherwise
allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in writing
by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the
headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this
Arbitration Program shall survive any termination, amendment, or expiration of
the Documents, unless the Parties otherwise expressly agree in writing making
specific reference to this Arbitration Program. To the extent permitted by
applicable law, the arbitrator shall have the power to award recovery of all
costs and fees (including attorney's fees, administrative fees, and arbitrators'
fees) to the prevailing Party. This Arbitration Program may be amended,
changed, or modified only by a writing which specifically refers to this
Arbitration Program and which is signed by all the Parties. If any term,
covenant, condition or provision of the Arbitration Program is found to be
unlawful or invalid or unenforceable, such illegality or invalidity or
unenforceable shall not affect the legality, validity or enforceability of the
remaining parts of this Arbitration Program, and all such remaining parts hereof
shall be valid and enforceable and have full force and effect as if the illegal,
invalid or unenforceable part had not been included. Each Party agrees to keep
all Disputes and arbitration proceedings strictly confidential, except for
disclosures of information required in the
<PAGE>
ordinary course of business of the Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be found
to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect. In lieu of such
provision, there shall be added automatically as part of this Agreement, a
provision as similar in its terms to such provision as may be possible and be
legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
LAKEVIEW DENTAL, P.C.
By: /s/ Kevin Gasser, D.D.S.
---------------------------------------
Kevin Gasser, D.D.S., President
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
---------------------------------------
Its: Senior VP
--------------------------------------
/s/ Kevin Gasser, D.D.S.
------------------------------------------
Kevin Gasser, D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Merger Consideration
A Target Companies
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
4.16 Excluded Assets and Excluded Liabilities
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
AND
DONALD W. LANNING, D.D.S.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . 3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . . 3
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . . 3
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . . 7
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . . 8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . . 8
3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4. COVENANTS OF DENTIST.
4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . 9
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . . 9
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . . 10
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 10
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . . 10
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . . 11
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . 11
Section 6. COVENANTS OF PENTEGRA AND DENTIST
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 12
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . . 12
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . 12
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8. DENTIST'S CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 13
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9. CLOSING DELIVERIES
<PAGE>
9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . . . . . . . 16
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . . 19
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . 21
14.12 NO RULE OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.13 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.14 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.15 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.16 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed
as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra") and Donald W. Lanning, D.D.S. ("Dentist").
WITNESSETH:
WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires
to receive from Dentist, certain assets of Dentist;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Dentist, the "Target Companies");
WHEREAS, it is intended for Federal income tax purposes that the
transfers contemplated by this Agreement, the Other Agreements and Pentegra's
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an
exchange within the meaning of Section 351 of the Internal Revenue Code of
1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and
conditions contained herein, on the Closing Date, Dentist shall convey,
transfer, deliver and assign to Pentegra or any affiliate of Pentegra
designated by Pentegra all of Dentist's right, title and interest in and to
those certain assets described on EXHIBIT 1.1 attached hereto (individually,
"Asset", and collectively "Assets"), free and clear of all obligations,
security interests, claims, liens and encumbrances, except as specifically
assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof.
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and
<PAGE>
contributed hereunder, and Dentist shall retain all of its right, title and
interest in and to, the assets not specifically transferred hereunder,
including without limitation, the assets described on EXHIBIT 1.2 (the
"Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Dentist
contained herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Dentist the consideration specified
in ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b)
attached hereto to the extent that such obligations, commitments, liabilities
and indebtedness are current and not otherwise in default. (the "Assumed
Liabilities"). Notwithstanding any contrary provision contained herein,
Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i)
any liability, commitment or obligation or trade payable or indebtedness not
specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on
EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default
under such contracts, leases, commitments or obligations which occurred on or
before the Closing Date; (iii) any liability for any employee benefits
payable to employees of Dentist, including, but not limited to, liabilities
arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any
liability based upon or arising out of a violation of any antitrust or
similar restraint-of-trade laws by Dentist, including, without limiting the
generality of the foregoing, any such antitrust liability which may arise in
connection with agreements, contracts, commitments or orders for the sale of
goods or provision of services by Dentist reflected on the books of Dentist
at or prior to the Closing Date; (v) any liability based upon or arising out
of any tortious or wrongful actions of Dentist, any licensed professional
employee or independent contractor of Dentist, (vi) any liability for the
payment of any taxes of Dentist, including without limitation, sales, use and
other transfer taxes and income taxes arising from or by reason of the
transactions contemplated by this Agreement; (vii) any indebtedness secured
by deeds of trust or mortgages on real property; nor (viii) any liability
incurred or to be incurred pursuant to any malpractice or other suits or
actions pending against Dentist.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement, the
Dentist shall execute and deliver all such deeds, bills of sale, assignments
and assurances and take and do all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under the Assets in Pentegra or otherwise to carry
out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
Dentist hereby represents and warrants to Pentegra as follows:
2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the
State of Texas. Dentist does not have any assets, employees or offices in
any state other than the state set forth in the first sentence of this
SECTION 2.1.
2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into
and perform this
<PAGE>
Agreement and the other agreements to be executed and delivered in connection
herewith. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing
Date, duly executed and delivered by Dentist and constitute or will
constitute the legal, valid and binding obligations of Dentist in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of
this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and,
subject to the receipt of consents described on EXHIBIT 2.4, the consummation
of the actions contemplated hereby will not, result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Dentist is a party or
by which Dentist is bound, or violate any material restrictions of any kind
to which Dentist is subject, or result in any lien or encumbrance on any of
Dentist's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All material
building or other permits, certificates of occupancy, concessions, grants,
franchises, licenses, certificates of need and other governmental
authorizations and approvals required for the conduct of the Business or the
use of the Assets, or waivers thereof, have been duly obtained and are in
full force and effect and are described on EXHIBIT 2.3. There are no
proceedings pending or, to the knowledge of Dentist, threatened, which may
result in the revocation, cancellation or suspension, or any adverse
modification, of any such licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Dentist.
2.5 [INTENTIONALLY DELETED].
2.6 [INTENTIONALLY DELETED].
2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any
related unaudited statements of income, retained earnings, schedule of
accounts receivable, accounts payable and accrued liabilities, and cash flows
for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Dentist as of
the dates and for the periods indicated and reflect all fixed and contingent
liabilities of Dentist.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Dentist leases, as lessor or lessee, real or personal
property used in operating the Business, related to the Assets or otherwise.
All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance
with their respective terms, and there is not under any such lease any
existing default by Dentist, as lessor or lessee, or any condition or event
of which Dentist has knowledge which with notice or lapse of time, or both,
would constitute a default, in respect of which Dentist has not taken
adequate steps to cure such default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Dentist has no knowledge of any
latent defects therein.
<PAGE>
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances
set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to the Closing Date and evidence
of such releases of liens and claims shall be provided to Pentegra on the
Closing Date and the Assets shall not be used to satisfy such liens, claims
or encumbrances. Pentegra acknowledges that it has acquired the assets
"where and as is" relying solely upon Pentegra's own examination.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Dentist, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Dentist has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Dentist, including the names of any entities from whom Dentist previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Dentist in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Dentist has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the most recent payroll report of Dentist, showing
all current employees of Dentist and their current levels of compensation,
(b) promised increases in compensation of employees of Dentist that have not
yet been effected, (c) oral or written employment agreements, consulting
agreements or independent contractor agreements (and all amendments thereto)
to which Dentist is a party, copies of which have been delivered to Pentegra,
and (d) all employee manuals, materials, policies, procedures and
work-related rules, copies of which have been delivered to Pentegra. Dentist
is in compliance with all applicable laws, rules, regulations and ordinances
respecting employment and employment practices. Dentist has not engaged in
any unfair labor practice. There are no unfair labor practices charges or
complaints pending or threatened against Dentist, and Dentist has never been
a party to any agreement with any union, labor organization or collective
bargaining unit.
2.14 LEGAL PROCEEDINGS. Except as set forth on Exhibit 2.16, neither
Dentist nor the Business nor any of the Assets is subject to any pending, nor
does Dentist have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Dentist, the Business, the Assets or the transactions contemplated
by this Agreement, and, to the knowledge of Dentist, no basis for any such
action exists, nor is there any legal impediment of which Dentist has
knowledge to the continued operation of its business or the use of the Assets
in the ordinary course, subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Dentist ("Contracts"), entered into
<PAGE>
in connection with and related to the Assets or the Business, all of which
are listed or incorporated by reference on EXHIBIT 2.8 (in the case of
leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15
(in the case of Contracts other than leases) attached hereto. Except as
otherwise indicated on such Exhibits, all of such Contracts are valid,
binding and enforceable in accordance with their terms and are in full force
and effect, and no defenses, offsets or counterclaims have been asserted or
may be made by any party thereto. Except as indicated on such Exhibits,
there is not under any such Contract any existing default by Dentist, or any
condition or event of which Dentist has knowledge which with notice or lapse
of time, or both, would constitute a default. Dentist has no knowledge of
any default by any other party to such Contracts. Dentist has not received
notice of the intention of any party to any Contract to cancel or terminate
any Contract and have no reason to believe that any amendment or change to
any Contract is contemplated by any party thereto. Other than those
contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13
and EXHIBIT 2.15, Dentist is not a party to any material written or oral
agreement contract, lease or arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
the Dentist, oral or written, that provide for prepayments or deferred
installment payments; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Dentist on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16,
Dentist has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement, other than in the course of business;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material
<PAGE>
obligation or liability (absolute, accrued, contingent or otherwise) other
than (i) liabilities shown or reflected on the Balance Sheet, (ii)
liabilities incurred since the Balance Sheet Date in the ordinary course of
business;
(c) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
(d) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(e) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Dentist since the Balance Sheet
Date;
(f) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(g) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(h) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(i) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(j) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(k) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties,
assets or business or the Business or the Assets, or experienced any other
material adverse change in its financial condition, assets, prospects,
liabilities or business; or
(l) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports
and other statements) required to have been filed by it or have been properly
extended, and has paid all taxes (including any interest, penalty or
additions thereto) required to have been paid by it. All such tax returns
are complete and accurate in all respects and properly reflect the relevant
taxes for the periods covered thereby. Dentist has not received any notice
that any tax deficiency or delinquency has been or may be asserted against
Dentist. There are no audits relating to taxes of Dentist pending or in
process or, to the knowledge of Dentist, threatened. Dentist is not
currently the beneficiary of any waiver of any statute of limitations in
respect of taxes nor of any extension of time within which to file any tax
return or to pay any tax assessment or deficiency. There are no liens or
encumbrances relating to taxes on or threatened against any of the assets of
Dentist. Dentist has withheld and paid all taxes required by law to have
been withheld and paid by it. Neither Dentist nor any predecessor of Dentist
is or has been a party to any tax allocation or
<PAGE>
sharing agreement or a member of an affiliated group of corporations filing a
consolidated Federal income tax return. Dentist has delivered to Pentegra
correct and complete copies of Dentist's three most recently filed annual
state, local and Federal income tax returns, together with all examination
reports and statements of deficiencies assessed against or agreed to by
Dentist during the three calendar year period preceding the date of this
Agreement. Dentist has neither made any payments, is obligated to make any
payments, or is a party to any agreement that under any circumstance could
obligate it to make any payments that will not be deductible under Code
section 280G.
(b) Dentist does not intend to dispose of any of the shares of Pentegra
Common Stock to be received hereunder and is not a party to any plan,
arrangement or agreement for the disposition of such shares. Nothing
contained herein shall prohibit Dentist from selling such shares of Pentegra
Common Stock after the designated holding period and in accordance with
SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated
by this Agreement which may be now or hereafter asserted against Pentegra,
Dentist resulting from any action taken by Dentist or their respective agents
or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Dentist did not have, as of the Balance Sheet
Date, and has not incurred since that date and will not have incurred as of
the Closing Date, any material liabilities or obligations of any nature,
whether accrued, absolute, contingent or otherwise, and whether due or to
become due, other than those incurred in the ordinary course of business or
as set forth on EXHIBIT 2.16. Dentist does not know, or have reasonable
grounds to know, of any basis for the assertion against Dentist as of the
Balance Sheet Date, of any claim or liability of any nature in any amount not
fully reflected or reserved against on the Balance Sheet, or of any claim or
liability of any nature arising since that date other than those incurred in
the ordinary course of business or contemplated by this Agreement. All
indebtedness of Dentist (including without limitation, indebtedness for
borrowed money, guaranties and capital lease obligations) is described on
EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Dentist and each licensed professional of
Dentist carries property, liability, malpractice, workers' compensation and
such other types of insurance as is customary in the industry. Valid and
enforceable policies in such amounts are outstanding and duly in force and
will remain duly in force through the Closing Date. All such policies are
described in EXHIBIT 2.20 attached hereto and true and correct copies have
been delivered to Pentegra. Dentist has not received notice or other
communication from the issuer of any such insurance policy cancelling or
amending such policy or threatening to do so. Neither Dentist nor any
licensed professional employee of Dentist has any outstanding claims,
settlements or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Dentist has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist
Plan," and collectively "Dentist Plans") have been operated and administered
in all material respects in accordance with all applicable laws, rules and
regulations, including without limitation, ERISA, the Internal Revenue Code
of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment
Act of 1967, as amended, and the related rules and regulations adopted by
those Federal agencies responsible for the administration of such laws. To
the best of the Dentist's knowledge, no act or failure to
<PAGE>
act by Dentist has resulted in a "prohibited transaction" (as defined in
ERISA) with respect to the Dentist Plans. No "reportable event" (as defined
in ERISA) has occurred with respect to any of the Dentist Plans. Dentist has
not previously made, is not currently making, and is not obligated in any way
to make, any contributions to any multiemployer plan within the meaning of
the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each
Dentist Plan, either (i) the value of plan assets (including commitments
under insurance contracts) is at least equal to the value of plan liabilities
or (ii) the value of plan liabilities in excess of plan assets is disclosed
on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Dentist, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed
professional employees, and the conduct of the Business and use of the
Assets, have complied with all applicable laws, rules, regulations and
licensing requirements, including, without limitation, the Federal
Environmental Protection Act, the Occupational Safety and Health Act, the
Americans with Disabilities Act and any environmental laws and medical waste
laws, and there exist no violations by Dentist or any licensed professional
employee of Dentist of any Federal, state or local law or regulation.
Dentist has not received any notice of a violation of any Federal, state and
local laws, regulations and ordinances relating to the operations of the
Business and Assets and no notice of any pending inspection or violation of
any such law, regulation or ordinance has been received by Dentist.
2.24 THIRD PARTY PAYORS. Dentist and each licensed professional
employee or independent contractor of Dentist has timely filed all claims or
other reports required to be filed with respect to the purchase of services
by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are
no pending appeals, overpayment determinations, adjustments, challenges,
audit, litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Dentist and each
licensed professional employee of Dentist. Neither Dentist nor any licensed
professional employee of Dentist has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Dentist and Dentist's licensed professional employees have not (a) knowingly
and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist
in this Agreement, and no Exhibit or certificate issued or executed by, or
information furnished by Dentist or to be furnished by Dentist to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Dentist has with any bank or other
financial institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
<PAGE>
deposit box, etc.) and the person or persons authorized in respect thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer
or employee (or their respective spouses, children or affiliates) owns
directly or indirectly, on an individual or joint basis, any interest in, has
a compensation or other financial arrangement with, or serves as an officer
or director of, any customer or supplier or competitor of Dentist or any
organization that has a material contract or arrangement with Dentist.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Dentist's services which
accounted for more than 10% of revenues of Dentist in the preceding fiscal
year. Dentist has good relations with all such payors and other material
payors of Dentist and none of such payors has notified Dentist that it
intends to discontinue its relationship with Dentist or to deny any claims
submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Dentist as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Pentegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would
not have a material adverse effect, there are no proceedings pending or, to
the knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened,
<PAGE>
litigation, governmental investigation, condemnation or other proceeding
against or relating to or affecting Pentegra, its business, assets or the
transactions contemplated by this Agreement, and, to the knowledge of
Pentegra, no basis for any such action exists, nor is there any legal
impediment of which Pentegra has knowledge to the continued operation of its
business or the use of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Dentist pursuant
hereto, or in connection with the transactions contemplated hereby, contains
or will contain any untrue statement of a material fact, or omits or will
omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
SECTION 4. COVENANTS OF DENTIST.
Dentist agrees that between the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and conditions. Dentist agrees to complete the
Exhibits hereto to be provided by him in form and substance satisfactory to
both Dentist and Pentegra.
4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the
Assets in the ordinary course. Dentist shall not enter into any lease,
contract, indebtedness, commitment, purchase or sale or acquire or dispose of
any capital asset relating to the Business or the Assets except in the
ordinary course of business. Dentist shall use their best efforts to
preserve the Business and Assets intact and shall not take any action that
would have an adverse effect on the Business or Assets. Dentist shall use
their best efforts to preserve intact the relationships with payors,
customers, suppliers, patients and others having significant business
relations with Dentist. Dentist shall collect its receivables and pay its
trade payables in the ordinary course of business. Dentist shall not
introduce any new method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized
representatives access to, and make available for inspection, all of the
assets and business of Dentist, the Business and the Assets, including
employees, customers and suppliers and permit Pentegra and its authorized
representatives to
<PAGE>
inspect and make copies of all documents, records and information with
respect to the business or assets of Dentist, the Business or the Assets as
Pentegra or its representatives may request. Dentist shall promptly notify
Pentegra in writing of (a) any notice or communication relating to a default
or event that, with notice or lapse of time or both, could become a default,
under any contract, commitment or obligation to which Dentist is a party or
relating to the Business or the Assets, and (b) any adverse change in
Dentist's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall
use his best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby,
including consents described on EXHIBIT 2.4. Dentist shall use his best
efforts to obtain all licenses, permits, approvals or other authorizations
required under any law, rule, regulation, or otherwise to provide the
services of the Practice contemplated by the Service Agreement and to conduct
the intended business of the Practice and operate the Business and use the
Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance
with the provisions hereof, Dentist shall not, and shall use its best efforts
to cause Dentist's employees, agents and representatives not to, initiate,
solicit or encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer, including without limitation, any
proposal or offer to the Dentist, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of Dentist or
engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to
such proposal or offer, and Dentist will immediately cease any such
activities, discussions or negotiations heretofore conducted with respect to
any of the foregoing. Dentist shall immediately notify Pentegra if any such
inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Dentist or any entity might have any liability whatsoever
arising from any insurance, pension plan, employment tax or similar
liability of Dentist to any employee or other person or entity (including,
without limitation, any Dentist Plan and any liability under employment
contracts with Dentist) allocable to services performed prior to the Closing
Date. Dentist acknowledges that the purpose and intent of this covenant is
to assure that Pentegra shall have no liability whatsoever at any time after
the Closing Date with respect to any of Dentist's employees or similar
persons or entities, including, without limitation, any Dentist Plan for the
period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash
compensation of the Dentist (other than in the ordinary course of business)
or other employee or an independent contractor of Dentist, adopt, amend or
terminate any compensation plan, employment agreement, independent contractor
agreement, employee policies and procedures or employee benefit plan, take
any action that could deplete the assets of any employee benefit, or fail to
pay any premium or contribution due or file any report with respect to any
employee benefit plan, or take any other actions with respect to its
employees or employee matters which might have an adverse effect upon
Dentist, its business, assets or prospects.
4.8 [INTENTIONALLY OMITTED].
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best
efforts to take, or cause to be taken, all actions necessary to effect the
acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material
respect the tax or financial accounting methods or practices followed by
Dentist (including any material change in any
<PAGE>
assumption underlying, or any method of calculating, any bad debt,
contingency or other reserve), except as may be required by law or generally
accepted accounting principles. Dentist will duly, accurately and timely
(without regard to any extensions of time) file all returns, information
statements and other documents relating to taxes of Dentist required to be
filed by it, and pay all taxes required to be paid by it, on or before the
Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby
waive any compliance with the applicable state Bulk Transfers Act, if any.
Dentist covenants and agrees that all of the creditors with respect to the
Business and the Assets will be paid in full by Dentist prior to the Closing
Date, except to extent that any liability to such creditors is assumed by
Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall
furnish Pentegra with proof of payment of all creditors with respect to the
Business and the Assets. Notwithstanding the foregoing, Dentist may dispute
the validity or amount of any such creditor's claim without being deemed to
be in violation of this SECTION 4.11, provided that such dispute is in good
faith and does not unreasonably delay the resolution of the claim and
provided, further that Dentist agrees to indemnify and bond Pentegra for such
amounts as is satisfactory to Pentegra.
4.12 LEASE. If Dentist leases any of its premises from the Dentist or
other affiliate of Dentist, Pentegra shall have entered into a building lease
(the "Building Lease") with the owner of such premises on terms and
conditions satisfactory to Pentegra, the terms and conditions of which shall
include, without limitation, (i) a five year initial term plus three
five-year renewal options, (ii) a lease rate equal to the fair market value
lease rate, as agreed to by Pentegra, and (iii) such other provisions to be
acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made
by Pentegra for the purpose of allowing Pentegra to hire those non-dental
employees of Dentist employed by the Dentist as of the Closing Date with,
such employment to be effective as of the Closing Date. Notwithstanding the
above, Dentist shall remain liable under any Dentist Plans for any claims
incurred by any employees or their spouses or dependents, and for all
compensation, bonuses, benefits and other such items and other liabilities
related to Dentist's employees incurred by Dentist prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all
employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall
be treated as "leased employees" (as defined in Code Section 414(n)) of
Dentist and shall be treated as Clinic employees for purposes of eligibility
and participation in Dentist Plans.
4.15 INSURANCE. Dentist shall agree to have and shall assist Pentegra
and its affiliates to be named as an additional insured on its liability
insurance programs, effective as of the Closing Date.
4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited
liability company, partnership or other legal entity (the "Practice") for the
purpose of practicing dentistry and entering into the Service Agreement. The
Practice shall be duly organized, in existing and in good standing under the
laws of the State in which the Dentist and the Practice are to practice
dentistry. The Practice shall have all necessary power to own all of its
assets and to carry on its business as such business is now being conducted.
The Dentist shall be the sole member/shareholder/partner of the Practice and
own all such interests free of all security interests, claims, encumbrances
and liens. Each interest in the Practice shall be legally and validly issued
and fully paid and nonassessable. There shall be no outstanding (a) bonds,
debentures, notes or other obligations the holders of which have the right to
vote with the members/partners/shareholders of the Practice on any matter,
(b) securities of the Practice convertible into equity interests in the
Practice, or (c) commitments, options, rights or warrants to issue any such
equity interests in the Practice, to issue securities of the Practice
convertible into such equity interests, or to redeem any securities of the
Practice. No interests
<PAGE>
of the Practice shall have been issued or disposed of in violation of the
preemptive rights, rights of first refusal or similar rights of any of the
Practice's members/partners/shareholders. The Practice shall qualify to do
business as a foreign entity in any other state or jurisdiction by reason of
its business, properties or activities in or relating to such other state or
jurisdiction.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation,
Bylaws/Regulations and minutes of the Practice and all amendments thereto of
the Practice shall have been delivered to Pentegra. The minute books of the
Practice shall contain all accurate minutes of the meetings of and consents
to actions taken without meetings of the members\managers/partners/board of
directors of the Practice since its formation. The books of account of the
Practice shall have been kept accurately in the ordinary course of business
and the revenues, expenses, assets and liabilities of the Practice shall have
been properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements
and other documents to be executed and delivered by it pursuant to this
Agreement, including without limitation, the Service Agreement and each
Employment Agreement to be executed and delivered on the Closing Date, and
has taken all action required by law, its Organization/Partnership
Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to
authorize the execution, delivery and performance of such documents. The
Service Agreement, the Employment Agreement and the other agreements
contemplated hereby shall have been duly executed and delivered by the
Practice on the Closing Date and constitute or will constitute the legal,
valid and binding obligations of the Practice enforceable against the
Practice in accordance with their respective terms, except as may be limited
by applicable bankruptcy, insolvency or similar laws affecting creditors'
rights generally or the availability of equitable remedies. The execution
and delivery of the Service Agreement, the Employment Agreements and the
other agreements contemplated hereby will not violate any provision of the
organizational documents of the Practice or any provisions of, or result in
the acceleration of, any obligation under any mortgage, lien, lease,
agreement, rent, instrument, order, arbitration award, judgment or decree to
which the Practice is a party or by which the Practice is bound, or violate
any material restrictions of any kind to which the Practice is subject, or
result in any lien or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and has filed with
the proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra and Dentist agree to
complete the Exhibits hereto to be provided by both parties.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
<PAGE>
SECTION 6. COVENANTS OF PENTEGRA AND DENTIST.
Pentegra and Dentist agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to
promptly prepare and file with the Securities Exchange Commission ("SEC")
the Registration Statement on Form S-1 (or other appropriate Form) to be
filed by Pentegra in connection with its Initial Public Offering (including
the prospectus constituting a part thereof, the "Registration Statement").
Pentegra shall obtain all necessary state securities laws or "Blue Sky"
permits and approvals required to carry out the transactions contemplated by
this Agreement and the Dentist shall furnish all information concerning
Dentist as may be reasonable requested in connection with any such action.
Dentist represents and warrants that none of the information or documents
supplied or to be supplied by it specifically for inclusion in the
Registration Statement, by exhibit or otherwise, will, at the time the
Registration Statement and each amendment or supplement thereto, if any,
becomes effective under the Securities Act of 1933, 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, in light of
the circumstances under which they were made, not misleading. Dentist shall
be entitled to review the Registration Statement and each amendment thereto,
if any, prior to the time each becomes effective under the Securities Act of
1933.
Dentist shall furnish Pentegra will all information concerning itself and
such other matters as may be reasonable requested by Pentegra in connection
with the preparation of the Registration Statement and each amendment or
supplement thereto, or any other statement, filing, notice or application
made by or on behalf of each such party or any of its subsidiaries to any
governmental entity in connection with the transactions contemplated by the
Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Dentist contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied
with all covenants and conditions required by this Agreement to be performed
and complied with by Dentist prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Dentist shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Dentist, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
<PAGE>
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a mutually agreeable Service Agreement (the
"Service Agreement"), which may be in the form attached hereto as EXHIBIT
7.7, and otherwise satisfactory to Dentist and Pentegra, pursuant to which
Pentegra will provide management services to the Practice. Dentist shall have
executed and delivered a mutually agreeable Guaranty Agreement which may be
in the form attached as EXHIBIT 4.10, and otherwise satisfactory to Dentist
and Pentegra, of the Service Agreement pursuant to which Dentist shall, among
other things, guaranty the obligations of the Practice under the Service
Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her
employment agreement and executed an mutually agreeable employment agreement
("Employment Agreement") with the Practice which may be in the form attached
hereto as EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra.
7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary
government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables
or payables between Dentist and its affiliates and Dentist shall not have any
liabilities, including indebtedness, guaranties and capital leases, that are
not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Dentist shall have named Pentegra as an additional
insured on its liability insurance program in accordance with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Dentist since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. DENTIST'S CONDITIONS PRECEDENT.
The obligations of Dentist hereunder are subject to fulfillment at or
prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pentegra contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior
<PAGE>
to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly
executed in form satisfactory to Dentist and its counsel, referred to in
SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF DENTIST. On or before the Closing Date, Dentist shall
deliver to Pentegra the following, all of which shall be in a form
satisfactory to counsel to Pentegra and shall be held by Jackson & Walker,
L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an
escrow agreement or letter agreement in form and substance mutually
acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a bill of sale conveying the Assets to Pentegra;
(d) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(e) certificates of Dentist dated as of the Closing Date, (i) as to
the truth and correctness of the representations and warranties of Dentist
contained herein; (ii) as to the performance of and compliance by Dentist
with all covenants contained herein; and (iii) certifying that all conditions
precedent of Dentist to the Closing have been satisfied;
(f) an opinion of counsel to Dentist opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Dentist, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Pentegra;
(g) non-foreign affidavits executed by Dentist;
(h) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
<PAGE>
(i) an executed Registration Rights Agreement between Pentegra and
Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(j) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Dentist the following, all of which shall be in a form
satisfactory to counsel to Dentist and shall be held by Jackson & Walker,
L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an
escrow agreement or letter agreement in form and substance mutually
acceptable to the parties hereto:
(a) the Acquisition Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Dentist;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Dentist;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Dentist to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit
<PAGE>
attached hereto, any agreement executed pursuant hereto, and any certificate
executed and delivered by any party pursuant to the terms of this Agreement,
shall constitute representations and warranties of Dentist or of Pentegra, as
the case may be. All such representations and warranties, and all
representations and warranties expressly labeled as such in this Agreement
shall survive the date of this Agreement and the Closing Date for a period of
five (5) years following the Closing Date, except that (i) the
representations and warranties with respect to environmental and medical
waste laws and health care laws and matters shall survive for a period of
fifteen (15) years and tax representations shall survive until one year after
the expiration of the applicable statute of limitations. Each party
covenants with the other parties not to make any claim with respect to such
representations and warranties, against any party after the date on which
such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof,
unless such party has timely given the notice required in SECTION 10.2, 10.3
or 10.4 hereof, as the case may be. Each party hereby releases, acquits and
discharges the other party from any and all claims and demands, actions and
causes of action, damages, costs, expenses and rights of setoff with respect
to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable,
are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE
EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND
AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS,
DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
(D) ANY LIABILITY OF PENTEGRA FOR COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEY'S FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION,
PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR
THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH.
<PAGE>
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION
10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS,
SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND
EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR
WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR
AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING
HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF
OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY
THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR
AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION,
PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR
THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
<PAGE>
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED
TO PENTEGRA OR ITS COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY
PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING
A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT
OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL
FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE
THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the
defense of such action or proceeding, such Indemnified Person shall notify
Indemnitor thereof. If any such action or other proceeding shall be brought
against any Indemnified Person, Indemnitor shall, upon written notice given
within a reasonable time following receipt by Indemnitor of such notice from
Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Dentist giving rise to
indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be
entitled to offset the amount of damages incurred by it as a result of such
breach of warranty, representation, covenant or agreement against any amounts
payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
<PAGE>
(b) at any time by Pentegra if any representation or warranty of Dentist
contained in this Agreement or in any certificate or other document executed
and delivered by Dentist pursuant to this Agreement is or becomes untrue or
breached in any material respect or if Dentist fails to comply in any
material respect with any covenant or agreement contained herein, and any
such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
(c) at any time by Dentist if any representation or warranty of Pentegra
contained in this Agreement or in any certificate or other document executed
and delivered by Pentegra pursuant to this Agreement is or becomes untrue or
breached in any material respect or if Pentegra fails to comply in any
material respect with any covenant or agreement contained herein and such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra or Dentist if the transaction contemplated hereby shall
not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Dentist, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares
of Pentegra Common Stock received as consideration by such party hereunder,
(ii) any interest (including without limitation, an option to buy or sell) in
any shares of Pentegra Common Stock, received by any party hereunder as
consideration, in whole or in part, and no such attempted transfer shall be
treated as effective for any purpose or (b) engage in any transaction,
whether or not with respect to any shares of Pentegra Common Stock or any
interest therein, received by any party hereunder as consideration, the
intent or effect of which is to reduce the risk of owning shares of Pentegra
Common Stock. The certificates evidencing the Pentegra Common Stock
delivered to Dentist pursuant to the terms hereof will bear a legend
substantially in the form set forth below and containing such other
information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the
shares of Pentegra Common Stock to be delivered to Dentist pursuant to this
Agreement have not been and will not be registered under the Securities Act
of 1933 and may not be resold without compliance with the Securities Act of
1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this
Agreement is being acquired solely for its own account, for investment
purposes only and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution. Dentist
covenants, warrants and represents that none of the shares of Pentegra Common
Stock issued to it will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after full compliance with all
<PAGE>
of the applicable provisions of the Securities Act, as amended, and the rules
and regulations of the Securities Exchange Commission and applicable state
securities laws and regulations. All certificates evidencing shares of
Pentegra Common Stock shall bear the following legend in addition to the
legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock
shall bear any legend required by the securities or blue sky laws of any
state where Dentist resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic
risk of an investment in Pentegra Common Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and has
such knowledge and experience in financial and business matters that they are
capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect its own interests in connection with
the acquisition of the Pentegra Common Stock. Dentist and its
representatives have had an adequate opportunity to ask questions and receive
answers from the officers of Pentegra concerning any and all matters relating
to the background and experience of the officers and directors of Pentegra,
the plans for the operations of the business of Pentegra, and any plans for
additional acquisitions and the like. Dentist and its representatives have
asked any and all questions in the nature described in the preceding sentence
and all questions have been answered to their satisfaction. Dentist is an
"accredited investor" as defined in Regulation D of the Securities Act of
1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes
and acknowledges that it had in the past, currently have, and in the future
may possibly have, access to certain confidential information of Pentegra
that is a valuable, special and unique asset of Pentegra's businesses.
Dentist agrees that it will not disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or
reason whatsoever, unless (i) such information becomes available to or known
by the public generally through no fault of Dentist, (ii) disclosure is
required by law or the order of any governmental authority under color of
law, provided, that prior to disclosing any information pursuant to this
clause (ii), Dentist shall, if possible, give prior written notice thereof to
the other parties hereto, and provide such other parties hereto with the
opportunity to contest such disclosure, (iii) Dentist reasonably believes
that such disclosure is required in connection with the defense of a lawsuit
against the disclosing party, or (iv) Dentist is the sole and exclusive owner
of such confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Dentist of the provisions of this SECTION 13, Pentegra shall be entitled to
an injunction restraining Dentist from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
Pentegra from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages. The obligations of the
parties under this SECTION 13 shall survive the termination of this Agreement.
Pentegra recognizes and acknowledges that it had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Dentist that is a valuable, special and unique asset of
Dentist. Pentegra agrees that it will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, unless (i) such information becomes
available to or known by the public generally through no fault of Pentegra,
(ii) disclosure is required by law or the order of any governmental authority
under color of law, provided, that prior to disclosing any information
pursuant to this clause (ii), Pentegra shall, if possible, give prior written
notice thereof to the other parties hereto, and provide such other parties
hereto with the opportunity to contest such disclosure, (iii) Pentegra
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit
<PAGE>
against the disclosing party, or (iv) Pentegra is the sole and exclusive
owner of such confidential information as a result of the transaction
contemplated hereunder or otherwise. In the event of a breach or threatened
breach by Pentegra of the provision of this SECTION 13. Dentist shall be
entitled to an injunction restraining Pentegra from disclosing, in whole or
in part, such confidential information. Nothing herein shall be construed as
prohibiting Pentegra from pursuing any other available remedy for such breach
or threatened breach, including the recovery of damages. The obligations of
the parties under this SECTION 13 shall survive the termination of this
Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement, together with the transactions contemplated by the Other
Agreement and the Initial Public Offering, will qualify as an exchange
meeting the requirements of Section 351 of the Code. The tax returns (and
schedules thereto) of Dentist and Pentegra shall be filed in a manner
consistent with such intention and Dentist and Pentegra shall each provide
the other with such tax information, reports, returns or schedules as may be
reasonably required to assist the other in so reporting the transactions
contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Dentist:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
<PAGE>
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Dentist for services rendered in
connection with negotiating and closing the transactions contemplated by this
Agreement or the documents to be executed in connection herewith, whether or
not such costs or expenses are incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Dentist.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF TEXAS
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS AND THE ESCROW LETTER ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT
OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS
BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one and the
same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
<PAGE>
purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Dentist, be relieved from its obligations
to Dentist under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Dentist, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Dentist (hereinafter referred to as a "Party"), whether made before or after
the institution of any legal proceeding, any dispute among the parties hereto
in any way arising out of, related to, or in connection with this Agreement
(hereinafter a "Dispute"), shall be resolved by binding arbitration in
accordance with the terms of this Section (hereinafter the "Arbitration
Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or foreclosing upon any
personal property in which there has been granted a security interest or lien
by a Party in the Documents. In Disputes involving indebtedness or other
monetary obligations, each Party agrees that the other Party may proceed
against all liable persons, jointly and severally against one or more of
them, without impairing rights against other liable persons. Nor shall a
Party be required to join the principal obligor or any other liable persons
(e.g., sureties or guarantors) in any proceeding against a particular person.
A Party may release or settle with one or more liable persons as the Party
deems fit without releasing or impairing rights to proceed against any
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
<PAGE>
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoenix,
Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or by
applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
PENTEGRA DENTAL GROUP, INC.
By: /s/ James L. Dunn, Jr.
-------------------------------------
Its: Senior Vice President
-------------------------------------
/s/ Donald W. Lanning, D.D.S.
----------------------------------------
Donald W. Lanning, D.D.S.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
Exhibit Description
------- -----------
<S> <C>
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 [intentionally omitted]
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
</TABLE>
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
and
David A. Little, D.D.S.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION> Page
----
<S> <C>
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 3
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 3
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 7
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 7
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 8
3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4. COVENANTS OF DENTIST.
4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 9
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 9
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . 10
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 10
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 10
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . . . . . . 10
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 11
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 11
Section 6. COVENANTS OF PENTEGRA AND DENTIST
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 12
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 12
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 12
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 12
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8. DENTIST'S CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 13
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9. CLOSING DELIVERIES
<PAGE>
9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . . . . . . 16
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 17
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 19
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . . 20
14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . 21
14.12 NO RULE OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . 21
14.13 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.14 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.15 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.16 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.17 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as
of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware
corporation ("Pentegra") and David A. Little, D.D.S. ("Dentist").
WITNESSETH:
WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires
to receive from Dentist, certain assets of Dentist;
WHEREAS, Pentegra or its affiliated designee has entered into or intends to
enter into Agreements and Plans of Reorganization, Asset Contribution Agreements
and other acquisition agreements (collectively, the "Other Agreements") with
such persons or entities or the stockholders of such entities listed on EXHIBIT
A (together with Dentist, the "Target Companies");
WHEREAS, it is intended for Federal income tax purposes that the transfers
contemplated by this Agreement, the Other Agreements and Pentegra's initial
public offering ("Initial Public Offering") of shares of its common stock, par
value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange
within the meaning of Section 351 of the Internal Revenue Code of 1986, as
amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock
is consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions
contained herein, on the Closing Date, Dentist shall convey, transfer, deliver
and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all
of Dentist's right, title and interest in and to those certain assets described
on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively
"Assets"), free and clear of all obligations, security interests, claims, liens
and encumbrances, except as specifically assumed, or taken subject to, by
Pentegra pursuant to SECTION 1.3(b) hereof.
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and contributed
<PAGE>
hereunder, and Dentist shall retain all of its right, title and interest in
and to, the assets not specifically transferred hereunder, including without
limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Dentist contained
herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Dentist the consideration specified in
ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b)
attached hereto to the extent that such obligations, commitments, liabilities
and indebtedness are current and not otherwise in default. (the "Assumed
Liabilities"). Notwithstanding any contrary provision contained herein,
Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i)
any liability, commitment or obligation or trade payable or indebtedness not
specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on
EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default
under such contracts, leases, commitments or obligations which occurred on or
before the Closing Date; (iii) any liability for any employee benefits
payable to employees of Dentist, including, but not limited to, liabilities
arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any
liability based upon or arising out of a violation of any antitrust or
similar restraint-of-trade laws by Dentist, including, without limiting the
generality of the foregoing, any such antitrust liability which may arise in
connection with agreements, contracts, commitments or orders for the sale of
goods or provision of services by Dentist reflected on the books of Dentist
at or prior to the Closing Date; (v) any liability based upon or arising out
of any tortious or wrongful actions of Dentist, any licensed professional
employee or independent contractor of Dentist, (vi) any liability for the
payment of any taxes of Dentist, including without limitation, sales, use and
other transfer taxes and income taxes arising from or by reason of the
transactions contemplated by this Agreement; (vii) any indebtedness secured
by deeds of trust or mortgages on real property; nor (viii) any liability
incurred or to be incurred pursuant to any malpractice or other suits or
actions pending against Dentist.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement, the
Dentist shall execute and deliver all such deeds, bills of sale, assignments and
assurances and take and do all such other actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right, title and interest
in, to and under the Assets in Pentegra or otherwise to carry out this
Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
Dentist hereby represents and warrants to Pentegra as follows:
2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the
State of TEXAS. Dentist does not have any assets, employees or offices in any
state other than the state set forth in the first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and
perform this Agreement and the other agreements to be executed and delivered in
connection herewith. This Agreement and all agreements and documents executed
and delivered in connection herewith have been, or will be as of
<PAGE>
the Closing Date, duly executed and delivered by Dentist and constitute or
will constitute the legal, valid and binding obligations of Dentist in
accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and
delivery of this Agreement, and the agreements executed and delivered
pursuant to this Agreement or to be executed and delivered on the Closing
Date, do not, and, subject to the receipt of consents described on EXHIBIT
2.4, the consummation of the actions contemplated hereby will not, result in
the acceleration of, any obligation under any mortgage, lien, lease,
agreement, rent, instrument, order, arbitration award, judgment or decree to
which Dentist is a party or by which Dentist is bound, or violate any
material restrictions of any kind to which Dentist is subject, or result in
any lien or encumbrance on any of Dentist's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets, or
waivers thereof, have been duly obtained and are in full force and effect and
are described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Dentist, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses or
permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Dentist.
2.5 [INTENTIONALLY DELETED].
2.6 [INTENTIONALLY DELETED].
2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any related
unaudited statements of income, retained earnings, schedule of accounts
receivable, accounts payable and accrued liabilities, and cash flows for the
twelve months then ended (collectively, with the related notes thereto, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and results of operations of Dentist as of the dates and for the
periods indicated and reflect all fixed and contingent liabilities of Dentist.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Dentist leases, as lessor or lessee, real or personal property
used in operating the Business, related to the Assets or otherwise. All such
leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their
respective terms, and there is not under any such lease any existing default by
Dentist, as lessor or lessee, or any condition or event of which Dentist has
knowledge which with notice or lapse of time, or both, would constitute a
default, in respect of which Dentist has not taken adequate steps to cure such
default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Dentist has no knowledge of any
latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if
<PAGE>
any, which are set forth in EXHIBIT 2.10 attached hereto. Dentist shall
cause all encumbrances set forth on EXHIBIT 2.10 (other than those
encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior
to the Closing Date and evidence of such releases of liens and claims shall
be provided to Pentegra on the Closing Date and the Assets shall not be used
to satisfy such liens, claims or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned or
used by Dentist, are in good, current, standard and merchantable condition and
are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Dentist has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Dentist, including the names of any entities from whom Dentist previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Dentist in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Dentist has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on
EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this
Agreement of: (a) the most recent payroll report of Dentist, showing all current
employees of Dentist and their current levels of compensation, (b) promised
increases in compensation of employees of Dentist that have not yet been
effected, (c) oral or written employment agreements, consulting agreements or
independent contractor agreements (and all amendments thereto) to which Dentist
is a party, copies of which have been delivered to Pentegra, and (d) all
employee manuals, materials, policies, procedures and work-related rules, copies
of which have been delivered to Pentegra. Dentist is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Dentist has not engaged in any unfair labor practice.
There are no unfair labor practices charges or complaints pending or threatened
against Dentist, and Dentist has never been a party to any agreement with any
union, labor organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the
Assets is subject to any pending, nor does Dentist have knowledge of any
threatened, litigation, governmental investigation, condemnation or other
proceeding against or relating to or affecting Dentist, the Business, the Assets
or the transactions contemplated by this Agreement, and, to the knowledge of
Dentist, no basis for any such action exists, nor is there any legal impediment
of which Dentist has knowledge to the continued operation of its business or the
use of the Assets in the ordinary course, subject to consents set forth on
EXHIBIT 2.4.
2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts, obligations
and commitments of Dentist ("Contracts"), entered into in connection with and
related to the Assets or the Business, all of which are listed or incorporated
by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case
of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than
leases) attached hereto. Except as otherwise indicated on such Exhibits, all of
such Contracts are valid, binding and enforceable in accordance with their terms
and are in full force and effect, and no defenses, offsets or counterclaims have
been asserted or may be made by any party thereto. Except as indicated on such
Exhibits, there is not under any such Contract any existing default by Dentist,
or
<PAGE>
any condition or event of which Dentist has knowledge which with notice or
lapse of time, or both, would constitute a default. Dentist has no knowledge
of any default by any other party to such Contracts. Dentist has not received
notice of the intention of any party to any Contract to cancel or terminate any
Contract and have no reason to believe that any amendment or change to any
Contract is contemplated by any party thereto. Other than those contracts,
obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT
2.15, Dentist is not a party to any material written or oral agreement contract,
lease or arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product or
service;
(h) Loan agreement or other contract for money borrowed or lent or to
be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of the
Dentist, oral or written, that provide for prepayments or deferred installment
payments; or
(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Dentist on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) or entered into any contract, lease, license or
commitment, except in connection with the performance of this Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued, contingent
or otherwise) other than (i) liabilities shown or reflected on the Balance
Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary
course of business;
(c) Made any payments to or loaned any money to any person or entity
other than in the ordinary course of business;
(d) Lost or terminated any employee, patient, customer or supplier
that has or may have,
<PAGE>
individually or in the aggregate, a material adverse effect on the Business;
(e) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have been
required due to income or operations of Dentist since the Balance Sheet Date;
(f) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(g) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(h) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants or
agents, or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of any officer, employee, consultant or agent;
(i) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00);
(j) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(k) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties, assets
or business or the Business or the Assets, or experienced any other material
adverse change in its financial condition, assets, prospects, liabilities or
business; or
(l) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it. All such tax returns are complete and accurate in all respects and
properly reflect the relevant taxes for the periods covered thereby. Dentist
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Dentist. There are no audits relating to taxes of
Dentist pending or in process or, to the knowledge of Dentist, threatened.
Dentist is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency. There are no
liens or encumbrances relating to taxes on or threatened against any of the
assets of Dentist. Dentist has withheld and paid all taxes required by law to
have been withheld and paid by it. Neither Dentist nor any predecessor of
Dentist is or has been a party to any tax allocation or sharing agreement or a
member of an affiliated group of corporations filing a consolidated Federal
income tax return. Dentist has delivered to Pentegra correct and complete
copies of Dentist's three most recently filed annual state, local and Federal
income tax returns, together with all examination reports and statements of
deficiencies assessed against or agreed to by Dentist during the three calendar
year period preceding the date of this Agreement. Dentist has neither made any
payments, is obligated to make any payments, or is a party to any agreement that
under any circumstance could obligate it to make any payments that will not be
deductible under Code section 280G.
(b) Dentist does not intend to dispose of any of the shares of Pentegra
Common Stock to be received hereunder and is not a party to any plan,
arrangement or agreement for the disposition of such shares. Nothing contained
herein shall prohibit Dentist from selling such shares of Pentegra Common Stock
after the
<PAGE>
designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated by
this Agreement which may be now or hereafter asserted against Pentegra, Dentist
resulting from any action taken by Dentist or their respective agents or
employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against
on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and
has not incurred since that date and will not have incurred as of the Closing
Date, any liabilities or obligations of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, other than those
incurred in the ordinary course of business or as set forth on EXHIBIT 2.16.
Dentist does not know, or have reasonable grounds to know, of any basis for the
assertion against Dentist as of the Balance Sheet Date, of any claim or
liability of any nature in any amount not fully reflected or reserved against on
the Balance Sheet, or of any claim or liability of any nature arising since that
date other than those incurred in the ordinary course of business or
contemplated by this Agreement. All indebtedness of Dentist (including without
limitation, indebtedness for borrowed money, guaranties and capital lease
obligations) is described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist
carries property, liability, malpractice, workers' compensation and such other
types of insurance as is customary in the industry. Valid and enforceable
policies in such amounts are outstanding and duly in force and will remain duly
in force through the Closing Date. All such policies are described in EXHIBIT
2.20 attached hereto and true and correct copies have been delivered to
Pentegra. Dentist has not received notice or other communication from the
issuer of any such insurance policy cancelling or amending such policy or
threatening to do so. Neither Dentist nor any licensed professional employee of
Dentist has any outstanding claims, settlements or premiums owed against any
insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached
hereto, Dentist has neither established, nor maintains, nor is obligated to make
contributions to or under or otherwise participate in, (a) any bonus or other
type of compensation or employment plan, program, agreement, policy, commitment,
contract or arrangement (whether or not set forth in a written document); (b)
any pension, profit-sharing, retirement or other plan, program or arrangement;
or (c) any other employee benefit plan, fund or program, including, but not
limited to, those described in SECTION 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT
2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been
operated and administered in all material respects in accordance with all
applicable laws, rules and regulations, including without limitation, ERISA, the
Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of
1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination
in Employment Act of 1967, as amended, and the related rules and regulations
adopted by those Federal agencies responsible for the administration of such
laws. No act or failure to act by Dentist has resulted in a "prohibited
transaction" (as defined in ERISA) with respect to the Dentist Plans. No
"reportable event" (as defined in ERISA) has occurred with respect to any of the
Dentist Plans. Dentist has not previously made, is not currently making, and is
not obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Dentist Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at least equal to the value
of plan liabilities or (ii) the value of plan liabilities in excess of plan
assets is disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing
Date, a party to any agreement or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree, rule or
regulation that materially and adversely affects the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Dentist,
the Business or the Assets.
<PAGE>
2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed
professional employees, and the conduct of the Business and use of the Assets,
have complied with all applicable laws, rules, regulations and licensing
requirements, including, without limitation, the Federal Environmental
Protection Act, the Occupational Safety and Health Act, the Americans with
Disabilities Act and any environmental laws and medical waste laws, and there
exist no violations by Dentist or any licensed professional employee of Dentist
of any Federal, state or local law or regulation. Dentist has not received any
notice of a violation of any Federal, state and local laws, regulations and
ordinances relating to the operations of the Business and Assets and no notice
of any pending inspection or violation of any such law, regulation or ordinance
has been received by Dentist.
2.24 THIRD PARTY PAYORS. Dentist and each licensed professional
employee or independent contractor of Dentist has timely filed all claims or
other reports required to be filed with respect to the purchase of services
by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are
no pending appeals, overpayment determinations, adjustments, challenges,
audit, litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Dentist and each
licensed professional employee of Dentist. Neither Dentist nor any licensed
professional employee of Dentist has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Dentist and Dentist's licensed professional employees has not (a) knowingly
and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist
in this Agreement, and no Exhibit or certificate issued or executed by, or
information furnished by Dentist or to be furnished by Dentist to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Dentist has with any bank or other
financial institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or
employee or family member of Dentist, or their respective spouses, children or
affiliates, owns directly or indirectly, on an individual or joint basis, any
interest in, has a compensation or other financial arrangement with, or serves
as an officer or director of, any customer or supplier or competitor of Dentist
or any organization that has a material contract or arrangement with Dentist.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of
the names and addresses of each payor of Dentist's services which accounted for
more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has
good relations with all such payors and other material payors of Dentist and
none of such payors has notified Dentist that it intends to discontinue its
relationship with Dentist or to deny any claims submitted to such payor for
payment.
<PAGE>
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Dentist as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions required
by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize
the execution, delivery and performance of this Agreement and such related
documents. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing Date,
duly executed and delivered by Pentegra and constitute or will constitute the
legal, valid and binding obligations of Pentegra, enforceable against Pentegra
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and delivery
of this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and, the
consummation of the actions contemplated hereby will not, violate any provision
of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or decree
to which Pentegra is a party or by which Pentegra is bound, or violate any
material restrictions of any kind to which Pentegra is subject, or result in any
lien or encumbrance on any of Pentegra's assets. Other than as have been
obtained or as would not have a material adverse effect, there are no consents
of any person or entity required for the transaction contemplated hereby on
behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Pentegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would not
have a material adverse effect, there are no proceedings pending or, to the
knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses or
permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any pending,
nor does Pentegra have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Pentegra, its business, assets or the transactions contemplated by
this Agreement, and, to the knowledge of Pentegra, no basis for any such action
exists, nor is there any legal impediment of which Pentegra has knowledge to the
continued operation of its business or the use of its Assets in the ordinary
course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports and
other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it, other than as would not have a material adverse effect. Pentegra
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Pentegra. There are no audits relating to taxes of
Pentegra pending or in process or, to the knowledge of Pentegra, threatened.
Pentegra is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency.
<PAGE>
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra
in this Agreement, and no Exhibit or certificate issued by officers or directors
of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements or facts contained therein not
misleading.
SECTION 4. COVENANTS OF DENTIST.
Dentist agrees that between the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and conditions. Dentist agrees to complete the
Exhibits hereto to be provided by him in form and substance satisfactory to
Pentegra.
4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the
Assets in the ordinary course. Dentist shall not enter into any lease,
contract, indebtedness, commitment, purchase or sale or acquire or dispose of
any capital asset relating to the Business or the Assets except in the ordinary
course of business. Dentist shall use their best efforts to preserve the
Business and Assets intact and shall not take any action that would have an
adverse effect on the Business or Assets. Dentist shall use their best efforts
to preserve intact the relationships with payors, customers, suppliers, patients
and others having significant business relations with Dentist. Dentist shall
collect its receivables and pay its trade payables in the ordinary course of
business. Dentist shall not introduce any new method of management, operations
or accounting.
4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized
representatives access to, and make available for inspection, all of the assets
and business of Dentist, the Business and the Assets, including employees,
customers and suppliers and permit Pentegra and its authorized representatives
to inspect and make copies of all documents, records and information with
respect to the business or assets of Dentist, the Business or the Assets as
Pentegra or its representatives may request. Dentist shall promptly notify
Pentegra in writing of (a) any notice or communication relating to a default or
event that, with notice or lapse of time or both, could become a default, under
any contract, commitment or obligation to which Dentist is a party or relating
to the Business or the Assets, and (b) any adverse change in Dentist's or the
Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall
use his best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby, including
consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain
all licenses, permits, approvals or other authorizations required under any law,
rule, regulation, or otherwise to provide the services of the Practice
contemplated by the Service Agreement and to conduct the intended
<PAGE>
business of the Practice and operate the Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of Closing or the termination of this Agreement in accordance with the
provisions hereof, Dentist shall not, and shall use its best efforts to cause
Dentist's employees, agents and representatives not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making or implementation
of any proposal or offer, including without limitation, any proposal or offer to
the Dentist, with respect to a merger, acquisition, consolidation or similar
transaction involving, or the purchase of all or any significant portion of the
assets or any equity securities of Dentist or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to such proposal or offer, and Dentist
will immediately cease any such activities, discussions or negotiations
heretofore conducted with respect to any of the foregoing. Dentist shall
immediately notify Pentegra if any such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund completely
for any accrued benefits, where applicable, or vested accrued benefits for which
Dentist or any entity might have any liability whatsoever arising from any
insurance, pension plan, employment tax or similar liability of Dentist to any
employee or other person or entity (including, without limitation, any Dentist
Plan and any liability under employment contracts with Dentist) allocable to
services performed prior to the Closing Date. Dentist acknowledges that the
purpose and intent of this covenant is to assure that Pentegra shall have no
liability whatsoever at any time after the Closing Date with respect to any of
Dentist's employees or similar persons or entities, including, without
limitation, any Dentist Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of the Dentist (other than in the ordinary course of business) or other employee
or an independent contractor of Dentist, adopt, amend or terminate any
compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect upon Dentist, its business, assets or
prospects.
4.8 [INTENTIONALLY OMITTED].
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best
efforts to take, or cause to be taken, all actions necessary to effect the
acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material
respect the tax or financial accounting methods or practices followed by Dentist
(including any material change in any assumption underlying, or any method of
calculating, any bad debt, contingency or other reserve), except as may be
required by law or generally accepted accounting principles. Dentist will
duly, accurately and timely (without regard to any extensions of time) file all
returns, information statements and other documents relating to taxes of Dentist
required to be filed by it, and pay all taxes required to be paid by it, on or
before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive
any compliance with the applicable state Bulk Transfers Act, if any. Dentist
covenants and agrees that all of the creditors with respect to the Business and
the Assets will be paid in full by Dentist prior to the Closing Date, except to
extent that any liability to such creditors is assumed by Pentegra pursuant to
this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with
proof of payment of all creditors with respect to the Business and the Assets.
Notwithstanding the foregoing, Dentist may dispute the validity or amount of any
such creditor's
<PAGE>
claim without being deemed to be in violation of this SECTION 4.11, provided
that such dispute is in good faith and does not unreasonably delay the
resolution of the claim and provided, further that Dentist agrees to
indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Dentist leases any of its premises from the Dentist or
other affiliate of Dentist, Pentegra shall have entered into a building lease
(the "Building Lease") with the owner of such premises on terms and conditions
satisfactory to Pentegra, the terms and conditions of which shall include,
without limitation, (i) a five year initial term plus three five-year renewal
options, (ii) a lease rate equal to the fair market value lease rate, as agreed
to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made
by Pentegra for the purpose of allowing Pentegra to hire those non-dental
employees of Dentist designated by Pentegra, such employment to be effective as
of the Closing Date. Notwithstanding the above, Dentist shall remain liable
under any Dentist Plans for any claims incurred by any employees or their
spouses or dependents, and for all compensation, bonuses, benefits and other
such items and other liabilities related to Dentist's employees incurred by
Dentist prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all
employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be
treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and
shall be treated as Clinic employees for purposes of eligibility and
participation in Dentist Plans.
4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective as
of the Closing Date.
4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited
liability company, partnership or other legal entity (the "Practice") approved
by Pentegra for the purpose of practicing dentistry and entering into the
Service Agreement. The Practice shall be duly organized, in existing and in
good standing under the laws of the State in which the Dentist and the Practice
are to practice dentistry. The Practice shall have all necessary power to own
all of its assets and to carry on its business as such business is now being
conducted. The Dentist shall be the sole member/shareholder/partner of the
Practice and own all such interests free of all security interests, claims,
encumbrances and liens. Each interest in the Practice shall be legally and
validly issued and fully paid and nonassessable. There shall be no outstanding
(a) bonds, debentures, notes or other obligations the holders of which have the
right to vote with the members/partners/shareholders of the Practice on any
matter, (b) securities of the Practice convertible into equity interests in the
Practice, or (c) commitments, options, rights or warrants to issue any such
equity interests in the Practice, to issue securities of the Practice
convertible into such equity interests, or to redeem any securities of the
Practice. No interests of the Practice shall have been issued or disposed of in
violation of the preemptive rights, rights of first refusal or similar rights of
any of the Practice's members/partners/shareholders. The Practice shall quality
to do business as a foreign entity in any other state or jurisdiction by reason
of its business, properties or activities in or relating to such other state or
jurisdiction.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations
and minutes of the Practice and all amendments thereto of the Practice shall
have been delivered to Pentegra and shall be in form and substance satisfactory
to Pentegra. The minute books of the Practice shall contain all accurate
minutes of the meetings of and consents to actions taken without meetings of the
members\managers/partners/board of directors of the Practice since its
formation. The books of account of the Practice shall have been kept accurately
in the ordinary course of business and the revenues, expenses, assets and
liabilities of the Practice shall have been properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute,
<PAGE>
deliver and perform its obligations under all agreements and other documents
to be executed and delivered by it pursuant to this Agreement, including
without limitation, the Service Agreement and each Employment Agreement or to
be executed and delivered on the Closing Date, and has taken all action
required by law, its Organization/Partnership Agreement/Articles of
Incorporation, its Bylaws/Regulations or otherwise, to authorize the
execution, delivery and performance of such documents. The Service
Agreement, the Employment Agreement and the other agreements contemplated
hereby shall have been duly executed and delivered by the Practice and
constitute or will constitute the legal, valid and binding obligations of the
Practice enforceable against the Practice in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally or the availability of
equitable remedies. The execution and delivery of the Service Agreement, the
Employment Agreements and the other agreements contemplated hereby will not
violate any provision of the organizational documents of the Practice or any
provisions of, or result in the acceleration of, any obligation under any
mortgage, lien, lease, agreement, rent, instrument, order, arbitration award,
judgment or decree to which the Practice is a party or by which the Practice
is bound, or violate any material restrictions of any kind to which the
Practice is subject, or result in any lien or encumbrance on any of the
Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and has filed with the
proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND DENTIST.
Pentegra and Dentist agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to
promptly prepare and file with the Securities Exchange Commission ("SEC") the
Registration Statement on Form S-1 (or other appropriate Form) to be filed by
Pentegra in connection with its Initial Public Offering (including the
prospectus constituting a part thereof, the "Registration Statement"). Pentegra
shall obtain all necessary state securities laws or "Blue Sky" permits and
approvals required to carry out the transactions contemplated by this Agreement
and the Dentist shall furnish all information concerning Dentist as may be
reasonable requested in connection with any such action.
Dentist represents and warrants that none of the information or documents
supplied or to be supplied by
<PAGE>
it specifically for inclusion in the Registration Statement, by exhibit or
otherwise, will, at the time the Registration Statement and each amendment or
supplement thereto, if any, becomes effective under the Securities Act of
1933, 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, in light of the circumstances under which they were made,
not misleading. Dentist shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.
Dentist shall furnish Pentegra will all information concerning itself and
such other matters as may be reasonable requested by Pentegra in connection with
the preparation of the Registration Statement and each amendment or supplement
thereto, or any other statement, filing, notice or application made by or on
behalf of each such party or any of its subsidiaries to any governmental entity
in connection with the transactions contemplated by the Other Agreements or this
Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at or
prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Dentist contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Dentist prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Dentist shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Dentist, the Business and the Assets, the results of which shall
be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service Agreement"),
in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which
Pentegra will provide management services to the Practice. Dentist shall have
executed and delivered a Guaranty Agreement in substantially the form attached
as EXHIBIT 4.10 of the Service Agreement pursuant to which Dentist shall, among
other things, guaranty the obligations of the Practice under the Service
Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her
employment agreement and executed an employment agreement ("Employment
Agreement") with the Practice in form and substance attached hereto as EXHIBIT
7.8 and otherwise satisfactory to Dentist and Pentegra.
<PAGE>
7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary
government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly
executed in form satisfactory to Pentegra and its counsel, referred to in
SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or
payables between Dentist and its affiliates and Dentist shall not have any
liabilities, including indebtedness, guaranties and capital leases, that are not
set forth on EXHIBIT 2.19.
7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured
on its liability insurance program in accordance with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Dentist since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. DENTIST'S CONDITIONS PRECEDENT.
The obligations of Dentist hereunder are subject to fulfillment at or prior
to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Pentegra contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly
executed in form satisfactory to Dentist and its counsel, referred to in SECTION
9.2.
8.5 SECURITIES APPROVAL. 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
on or before December 31, 1997. At or prior to the date that the Registration
Statement is declared effective by the SEC, Pentegra shall have received all
state securities and "Blue Sky" permits necessary to consummate the
<PAGE>
transactions contemplated hereby. The Pentegra Common Stock shall have been
approved for listing on Nasdaq or other exchange selected by Pentegra,
subject only to official notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF DENTIST. Within five business days after requested by
Pentegra, Dentist shall deliver to Pentegra the following, all of which shall be
in a form satisfactory to counsel to Pentegra and shall be held by Jackson &
Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an
escrow agreement or letter agreement in form and substance mutually acceptable
to the parties hereto:
(a) an executed original Service Agreement and executed originals of
all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a bill of sale conveying the Assets to Pentegra;
(d) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(e) certificates of Dentist dated as of the Closing Date, (i) as to
the truth and correctness of the representations and warranties of Dentist
contained herein; (ii) as to the performance of and compliance by Dentist with
all covenants contained herein; and (iii) certifying that all conditions
precedent of Dentist to the Closing have been satisfied;
(f) an opinion of counsel to Dentist opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Dentist, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Pentegra;
(g) non-foreign affidavits executed by Dentist;
(h) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(i) an executed Registration Rights Agreement between Pentegra and
Dentist, in substantially the form attached hereto as EXHIBIT 9.1(L) (the
"Registration Rights Agreement"); and
(j) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall
deliver to Dentist the following, all of which shall be in a form satisfactory
to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for
Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter
agreement in form and substance mutually acceptable to the parties hereto:
(a) the Acquisition Consideration;
<PAGE>
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance of
this Agreement and all related documents and agreements each certified by the
Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii) certifying
that all conditions precedent of Pentegra to the Closing have been satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and the
State of incorporation of Dentist;
(h) an opinion of counsel to Pentegra opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Pentegra, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Dentist;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Dentist to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in
any Exhibit attached hereto, any agreement executed pursuant hereto, and any
certificate executed and delivered by any party pursuant to the terms of this
Agreement, shall constitute representations and warranties of Dentist or of
Pentegra, as the case may be. All such representations and warranties, and all
representations and warranties expressly labeled as such in this Agreement shall
survive the date of this Agreement and the Closing Date for a period of five (5)
years following the Closing Date, except that (i) the representations and
warranties with respect to environmental and medical waste laws and health care
laws and matters shall survive for a period of fifteen (15) years and tax
representations shall survive until one year after the expiration of the
applicable statute of limitations. Each party covenants with the other parties
not to make any claim with respect to such representations and warranties,
against any party after the date on which such survival period shall terminate.
No party shall be entitled to claim indemnity from any other party pursuant to
SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice
required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party
hereby releases, acquits and discharges the other party from any and all claims
and demands, actions and causes of action, damages, costs, expenses and rights
of setoff with respect to which the notices required by SECTION 10.2, 10.3 or
10.4, as applicable, are not timely provided.
<PAGE>
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION
10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES
(INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL
THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE
BUSINESS INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY
PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF,
OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION
10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS
AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS
SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED
PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS,
DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT
LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING
FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S
<PAGE>
MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE
ASSETS, AND
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR AFTER
THE CLOSING DATE,
(D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE
FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING
FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY
PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR
AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION,
PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE
OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS
COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS,
THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the defense
of such action or proceeding, such Indemnified Person shall notify Indemnitor
thereof. If any such action or other proceeding shall be brought against any
Indemnified Person, Indemnitor shall, upon written notice given within a
reasonable time following receipt by Indemnitor of such notice from Indemnified
Person, be entitled
<PAGE>
to assume the defense of such action or proceeding with counsel chosen by
Indemnitor and reasonably satisfactory to Indemnified Person; provided,
however, that any Indemnified Person may at its own expense retain separate
counsel to participate in such defense. Notwithstanding the foregoing,
Indemnified Person shall have the right to employ separate counsel at
Indemnitor's expense and to control its own defense of such action or
proceeding if, in the reasonable opinion of counsel to such Indemnified
Person, (a) there are or may be legal defenses available to such Indemnified
Person or to other Indemnified Persons that are different from or additional
to those available to Indemnitor and which could not be adequately advanced
by counsel chosen by Indemnitor, or (b) a conflict or potential conflict
exists between Indemnitor and such Indemnified Person that would make such
separate representation advisable; provided, however, that in no event shall
Indemnitor be required to pay fees and expenses hereunder for more than one
firm of attorneys of Indemnified Person in any jurisdiction in any one action
or proceeding or group of related actions or proceedings. Indemnitor shall
not, without the prior written consent of any Indemnified Person, settle or
compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding to which such Indemnified Person is a
party unless such settlement, compromise or consent includes an unconditional
release of such Indemnified Person from all liability arising or potentially
arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Dentist giving rise to indemnification
under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset
the amount of damages incurred by it as a result of such breach of warranty,
representation, covenant or agreement against any amounts payable by Pentegra,
including the amounts payable under the Service Agreement. In the event of any
breach of warranty, representation, covenant or agreement by Pentegra giving
rise to indemnification under Section 10.2 or Section 10.4 hereof, Dentist shall
be entitled to offset the amount of damages incurred by it as a result of such
breach of warranty, representation, covenant or agreement against any amounts
payable by Dentist, including the amounts payable under the Service Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Dentist
contained in this Agreement or in any certificate or other document executed and
delivered by Dentist pursuant to this Agreement is or becomes untrue or breached
in any material respect or if Dentist fails to comply in any material respect
with any covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
(c) at any time by Dentist if any representation or warranty of Pentegra
contained in this Agreement or in any certificate or other document executed and
delivered by Pentegra pursuant to this Agreement is or becomes untrue or
breached in any material respect or if Pentegra fails to comply in any material
respect with any covenant or agreement contained herein and such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra or Dentist if the transaction contemplated (including the
Initial Public Offering) hereby shall not have been consummated by December 31,
1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Dentist, that such termination is
desirable and in the best interests of Pentegra.
<PAGE>
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date,
Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber,
pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra
Common Stock received by such party hereunder, (ii) any interest (including
without limitation, an option to buy or sell) in any shares of Pentegra Common
Stock, in whole or in part, and no such attempted transfer shall be treated as
effective for any purpose or (b) engage in any transaction, whether or not with
respect to any shares of Pentegra Common Stock or any interest therein, the
intent or effect of which is to reduce the risk of owning shares of Pentegra
Common Stock. The certificates evidencing the Pentegra Common Stock delivered
to Dentist pursuant to the terms hereof will bear a legend substantially in the
form set forth below and containing such other information as Pentegra may deem
necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the
shares of Pentegra Common Stock to be delivered to Dentist pursuant to this
Agreement have not been and will not be registered under the Securities Act of
1933 and may not be resold without compliance with the Securities Act of 1933.
The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement
is being acquired solely for its own account, for investment purposes only and
with no present intention of distributing, selling or otherwise disposing of it
in connection with a distribution. Dentist covenants, warrants and represents
that none of the shares of Pentegra Common Stock issued to it will be offered,
sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
except after full compliance with all of the applicable provisions of the
Securities Act, as amended, and the rules and regulations of the Securities
Exchange Commission and applicable state securities laws and regulations. All
certificates evidencing shares of Pentegra Common Stock shall bear the following
legend in addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Dentist resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic
risk of an investment in Pentegra Common Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and has such
knowledge and experience in financial and business matters that they are capable
of evaluating the merits and risks of the proposed investment and therefore have
the capacity to protect its own interests in connection with the acquisition of
the Pentegra Common Stock. Dentist and its representatives have had an adequate
opportunity to ask questions and receive answers from the officers of Pentegra
concerning any and all matters relating to the background and experience of the
officers and directors of Pentegra, the plans for the operations of the business
of Pentegra, and any plans for additional acquisitions and the like. Dentist
and its representatives have asked any and all questions in the nature described
in the
<PAGE>
preceding sentence and all questions have been answered to their
satisfaction. Dentist is an "accredited investors" as defined in Regulation D
of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes
and acknowledges that it had in the past, currently have, and in the future may
possibly have, access to certain confidential information of Pentegra that is
valuable, special and unique assets of Pentegra's businesses. Dentist agrees
that it will not disclose such confidential information to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
unless (i) such information becomes available to or known by the public
generally through no fault of Dentist, (ii) disclosure is required by law or the
order of any governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), Dentist shall, if
possible, give prior written notice thereof to the other parties hereto, and
provide such other parties hereto with the opportunity to contest such
disclosure, (iii) Dentist reasonably believes that such disclosure is required
in connection with the defense of a lawsuit against the disclosing party, or
(iv) Dentist is the sole and exclusive owner of such confidential information as
a result of the transactions contemplated hereunder or otherwise. In the event
of a breach or threatened breach by Dentist of the provisions of this SECTION
13, Pentegra shall be entitled to an injunction restraining Dentist from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting Pentegra from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
The obligations of the parties under this SECTION 13 shall survive the
termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement, together with the transactions contemplated by the Other
Agreement and the Initial Public Offering, will qualify as an exchange meeting
the requirements of Section 351 of the Code. The tax returns (and schedules
thereto) of Dentist and Pentegra shall be filed in a manner consistent with
such intention and Dentist and Pentegra shall each provide the other with such
tax information, reports, returns or schedules as may be reasonably required to
assist the other in so reporting the transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery, or by
facsimile AND overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
<PAGE>
If to Dentist:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without limiting
the generality of the foregoing and whether or not such liabilities may be
deemed to have been incurred in the ordinary course of business, Pentegra
shall not be liable to or required to pay, either directly or indirectly, any
fees and expenses of legal counsel, accountants, auditors or other persons or
entities retained by Dentist for services rendered in connection with
negotiating and closing the transactions contemplated by this Agreement or
the documents to be executed in connection herewith, whether or not such
costs or expenses are incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Dentist.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
<PAGE>
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one and the same
instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any entity
that, through one or more intermediaries is, controlled, controlled by or under
common control with, Pentegra. Upon any such assignment prior to the Closing,
all references herein to Pentegra (including those to Pentegra Common Stock)
shall be deemed to include references to the assignee and the assignee's common
stock. Notwithstanding any such assignment, Pentegra shall not, absent a
written release from Dentist, be relieved from its obligations to Dentist under
this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Dentist, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing, and
signed by the parties hereto. The waiver of any of the terms and conditions
of this Agreement shall not be construed as a waiver of any other terms and
conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Dentist (hereinafter referred to as a "Party"), whether made before or after
the institution of any legal proceeding, any dispute among the parties hereto
in any way arising out of, related to, or in connection with this Agreement
(hereinafter a "Dispute"), shall be resolved by binding arbitration in
accordance with the terms of this Section (hereinafter the "Arbitration
Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations
<PAGE>
and responsibilities as it relates to such warranties and covenants. No
provision of, nor the exercise of any rights under, this Arbitration Program
shall limit the right of any Party at any time to seek or use ancillary or
preliminary judicial or non-judicial self help remedies for the purposes of
obtaining, perfecting, preserving, or foreclosing upon any personal property
in which there has been granted a security interest or lien by a Party in the
Documents. In Disputes involving indebtedness or other monetary obligations,
each Party agrees that the other Party may proceed against all liable
persons, jointly and severally against one or more of them, without impairing
rights against other liable persons. Nor shall a Party be required to join
the principal obligor or any other liable persons (e.g., sureties or
guarantors) in any proceeding against a particular person. A Party may
release or settle with one or more liable persons as the Party deems fit
without releasing or impairing rights to proceed against any persons not so
released. All statutes of limitation that would otherwise be applicable shall
apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoenix,
Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall have
the power to award recovery of all costs and fees (including attorney's fees,
administrative fees, and arbitrators' fees) to the prevailing Party. This
Arbitration Program may be amended, changed, or modified only by a writing
which specifically refers to this Arbitration Program and which is signed by
all the Parties. If any term, covenant, condition or provision of the
Arbitration Program is found to be unlawful or invalid or unenforceable, such
illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or by
applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu of
such provision, there shall be added automatically as part of this Agreement,
a provision as similar in its terms to such provision as may be possible and
be legal,
<PAGE>
valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
PENTEGRA DENTAL GROUP, INC.
By: /s/ James L. Dunn, Jr.
--------------------------------
Its: Senior Vice President
--------------------------------
/s/ David A. Little, D.D.S.
------------------------------------
David A. Little, D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 [intentionally omitted]
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
SUSAN E. LUNSON, D.D.S., P.C.
AND
SUSAN E. LUNSON, D.D.S.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . .2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . .2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . .3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . .3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . .3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . .3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . .4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . .4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . .4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . .8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . .8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . .8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . .9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . .9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . .9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Section 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 12
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 12
Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 13
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 13
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 13
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 14
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 14
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS . . . . . . . . . . . . . 17
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 18
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 19
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 20
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . 21
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . 22
14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed
as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra"), Susan E. Lunson, D.D.S., P.C.
("Contributor") and Susan E. Lunson, D.D.S., shareholders of Contributor
(referred to herein as "Shareholder" or "Shareholders").
WITNESSETH:
WHEREAS, Contributor operates a dental practice ("Business") and Pentegra
is engaged in the business of managing certain non-dentistry aspects of
dental practices;
WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra
desires to receive from Contributor, certain assets of Contributor;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Contributor, the "Target
Companies");
WHEREAS, it is intended for Federal income tax purposes that the
transfers contemplated by this Agreement, the Other Agreements and Pentegra's
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an
exchange within the meaning of Section 351 of the Internal Revenue Code of
1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and
conditions contained herein, on the Closing Date, Contributor shall convey,
transfer, deliver and assign to Pentegra or any affiliate of Pentegra
designated by Pentegra all of Contributor's right, title and interest in and
to those certain assets described on EXHIBIT 1.1 attached hereto
(individually, "Asset", and collectively "Assets"), free and clear of all
obligations, security interests, claims, liens and encumbrances, except as
specifically assumed, or taken subject to, by Pentegra pursuant to SECTION
1.3(b) hereof.
<PAGE>
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and contributed hereunder, and Contributor shall retain all of
its right, title and interest in and to, the assets not specifically
transferred hereunder, including without limitation, the assets described on
EXHIBIT 1.2 (the "Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Contributor
contained herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Contributor the consideration
specified in ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Contributor listed on EXHIBIT
1.3(b) attached hereto to the extent that such obligations, commitments,
liabilities and indebtedness are current and not otherwise in default. (the
"Assumed Liabilities"). Notwithstanding any contrary provision contained
herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra
assume: (i) any liability, commitment or obligation or trade payable or
indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability
set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of
or default under such contracts, leases, commitments or obligations which
occurred on or before the Closing Date; (iii) any liability for any employee
benefits payable to employees of Contributor, including, but not limited to,
liabilities arising under any Contributor Plan (as defined in SECTION 2.21
hereof); (iv) any liability based upon or arising out of a violation of any
antitrust or similar restraint-of-trade laws by any Shareholder or
Contributor, including, without limiting the generality of the foregoing, any
such antitrust liability which may arise in connection with agreements,
contracts, commitments or orders for the sale of goods or provision of
services by Contributor reflected on the books of Contributor at or prior to
the Closing Date; (v) any liability based upon or arising out of any tortious
or wrongful actions of Contributor, any licensed professional employee or
independent contractor of Contributor or any Shareholder, (vi) any liability
for the payment of any taxes of Contributor or any Shareholder, including
without limitation, sales, use and other transfer taxes and income taxes
arising from or by reason of the transactions contemplated by this Agreement;
(vii) any indebtedness secured by deeds of trust or mortgages on real
property; nor (viii) any liability incurred or to be incurred pursuant to any
malpractice or other suits or actions pending against Contributor or any
Shareholder.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement,
Contributor and Shareholders shall execute and deliver all such deeds, bills
of sale, assignments and assurances and take and do all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any
and all right, title and interest in, to and under the Assets in Pentegra or
otherwise to carry out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS.
Contributor and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Contributor is a professional
corporation or association, as applicable, duly organized, validly existing
and in good standing under the laws of the State of Texas. Contributor has
all necessary corporate powers to own all of its assets and to carry on its
business as such business is now being conducted. Contributor does not own
stock in or control, directly or indirectly,
<PAGE>
any other corporation, association or business organization, nor is
Contributor a party to any joint venture or partnership. The Shareholders are
the sole shareholders of Contributor and own all outstanding shares of
capital stock free of all security interests, claims, encumbrances and liens
in the amounts set forth on EXHIBIT 2.1. Each share of Contributor's common
stock has been legally and validly issued and fully paid and nonassessable.
No shares of capital stock of Contributor are owned by Contributor in
treasury. There are no outstanding (a) bonds, debentures, notes or other
obligations the holders of which have the right to vote with the stockholders
of Contributor on any matter, (b) securities of Contributor convertible into
equity interests in Contributor, or (c) commitments, options, rights or
warrants to issue any such equity interests in Contributor, to issue
securities of Contributor convertible into such equity interests, or to
redeem any securities of Contributor. No shares of capital stock of
Contributor have been issued or disposed of in violation of the preemptive
rights, rights of first refusal or similar rights of any of Contributor's
stockholders. Contributor is not required to qualify to do business as a
foreign corporation in any other state or jurisdiction by reason of its
business, properties or activities in or relating to such other state or
jurisdiction. Contributor does not have any assets, employees or offices in
any state other than the state set forth in the first sentence of this
SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the corporate
power to execute, deliver and perform this Agreement and all agreements and
other documents executed and delivered by it pursuant to this Agreement or to
be executed and delivered on the Closing Date, and has taken all action
required by law, its Articles or Certificate of Incorporation, its Bylaws or
otherwise, to authorize the execution, delivery and performance of this
Agreement and such related documents. Each Shareholder has the legal
capacity to enter into and perform this Agreement and the other agreements to
be executed and delivered in connection herewith. Contributor has obtained
the approval of its stockholders necessary to the consummation of the
transactions contemplated herein. This Agreement and all agreements and
documents executed and delivered in connection herewith have been, or will be
as of the Closing Date, duly executed and delivered by Contributor and
Shareholders, as appropriate, and constitute or will constitute the legal,
valid and binding obligations of Contributor and Shareholders, enforceable
against Contributor and Shareholders in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally or the availability of
equitable remedies. The execution and delivery of this Agreement, and the
agreements executed and delivered pursuant to this Agreement or to be
executed and delivered on the Closing Date, do not, and, subject to the
receipt of consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, violate any provision of the Articles or
Certificate of Incorporation or Bylaws of Contributor or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or
decree to which Contributor or any Shareholder is a party or by which
Contributor or any Shareholder is bound, or violate any material restrictions
of any kind to which Contributor is subject, or result in any lien or
encumbrance on any of Contributor's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to
the knowledge of Contributor and Shareholders, threatened, which may result
in the revocation, cancellation or suspension, or any adverse modification,
of any such licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Contributor or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been
<PAGE>
declared or paid by Contributor on any of its capital stock since the Balance
Sheet Date. No repurchase of any of Contributor's capital stock has been
approved, effected or is pending, or is contemplated by Contributor.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Contributor and all
amendments thereto have been delivered to Pentegra. The minute books of
Contributor contain accurate minutes of all meetings of and consents to
actions taken without meetings of the Board of Directors and stockholders of
Contributor since its formation. The books of account of Contributor have
been kept accurately in the ordinary course of business and the revenues,
expenses, assets and liabilities of Contributor have been properly recorded
in such books.
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore
furnished Pentegra with copies of its unaudited balance sheet and related
unaudited statements of income, retained earnings and cash flows for its
prior two full fiscal years, as well as copies of its unaudited balance sheet
as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet"
and the latest date thereof shall be referred to as the "Balance Sheet Date")
and any related unaudited statements of income, retained earnings, schedule
of accounts receivable, accounts payable and accrued liabilities, and cash
flows for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Contributor as
of the dates and for the periods indicated and reflect all fixed and
contingent liabilities of Contributor.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Contributor or any Shareholder leases, as lessor or lessee,
real or personal property used in operating the Business, related to the
Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and
enforceable in accordance with their respective terms, and there is not under
any such lease any existing default by Contributor, as lessor or lessee, or
any condition or event of which any Shareholder or Contributor has knowledge
which with notice or lapse of time, or both, would constitute a default, in
respect of which Contributor or Shareholders have not taken adequate steps to
cure such default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Contributor and Shareholders have
no knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good, valid
and marketable title to all of the Assets, free and clear of any liens,
claims, charges, exceptions or encumbrances, except for those, if any, which
are set forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all
encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances
indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the
Closing Date and evidence of such releases of liens and claims shall be
provided to Pentegra on the Closing Date and the Assets shall not be used to
satisfy such liens, claims or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Contributor, are in good, current, standard and merchantable
condition and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Contributor has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Contributor, including the names of any entities from whom Contributor
previously acquired significant assets. Except for off-the-shelf software
licenses and except as set forth on EXHIBIT 2.12, Contributor is not a
licensee in respect of any patents, trademarks, service marks, trade names,
copyrights or
<PAGE>
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Contributor
in connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Contributor has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the name of each director and officer of
Contributor and the offices held by each, (b) the most recent payroll report
of Contributor, showing all current employees of Contributor and their
current levels of compensation, (c) promised increases in compensation of
employees of Contributor that have not yet been effected, (d) oral or written
employment agreements, consulting agreements or independent contractor
agreements (and all amendments thereto) to which Contributor is a party,
copies of which have been delivered to Pentegra, and (e) all employee
manuals, materials, policies, procedures and work-related rules, copies of
which have been delivered to Pentegra. Contributor is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Contributor has not engaged in any unfair labor
practice. There are no unfair labor practices charges or complaints pending
or threatened against Contributor, and Contributor has never been a party to
any agreement with any union, labor organization or collective bargaining
unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Contributor nor the
Business nor any of the Assets is subject to any pending, nor does
Contributor or any Shareholder have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Contributor, any Shareholder, the Business, the
Assets or the transactions contemplated by this Agreement, and, to the
knowledge of Contributor and Shareholders, no basis for any such action
exists, nor is there any legal impediment of which Contributor or any
Shareholder has knowledge to the continued operation of its business or the
use of the Assets in the ordinary course, subject to consents set forth on
EXHIBIT 2.4.
2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Contributor ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted or may be made
by any party thereto. Except as indicated on such Exhibits, there is not
under any such Contract any existing default by Contributor or any
Shareholder, or any condition or event of which Contributor or any
Shareholder has knowledge which with notice or lapse of time, or both, would
constitute a default. Contributor and Shareholders have no knowledge of any
default by any other party to such Contracts. Contributor and Shareholders
have not received notice of the intention of any party to any Contract to
cancel or terminate any Contract and have no reason to believe that any
amendment or change to any Contract is contemplated by any party thereto.
Other than those contracts, obligations and commitments listed on EXHIBIT
2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Contributor are not a party to any
material written or oral agreement contract, lease or arrangement, including
without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
<PAGE>
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
the Contributor or Shareholders, oral or written, that provide for
prepayments or deferred installment payments; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Contributor on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16,
Contributor has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(d) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Contributor since the Balance
Sheet Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
<PAGE>
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(j) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties,
assets or business or the Business or the Assets, or experienced any other
material adverse change in its financial condition, assets, prospects,
liabilities or business;
(n) Declared or paid a distribution, payment or dividend of any
kind on the capital stock of Contributor;
(o) Repurchased, approved any repurchase or agreed to repurchase
any of Contributor's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Contributor has filed all tax returns (including tax
reports and other statements) required to have been filed by it, and has paid
all taxes (including any interest, penalty or additions thereto) required to
have been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Contributor has not received any notice that any tax deficiency
or delinquency has been or may be asserted against Contributor. There are
no audits relating to taxes of Contributor pending or in process or, to the
knowledge of Contributor, threatened. Contributor is not currently the
beneficiary of any waiver of any statute of limitations in respect of taxes
nor of any extension of time within which to file any tax return or to pay
any tax assessment or deficiency. There are no liens or encumbrances
relating to taxes on or threatened against any of the assets of Contributor.
Contributor has withheld and paid all taxes required by law to have been
withheld and paid by it. Neither Contributor nor any predecessor of
Contributor is or has been a party to any tax allocation or sharing agreement
or a member of an affiliated group of corporations filing a consolidated
Federal income tax return. Contributor has delivered to Pentegra correct and
complete copies of Contributor's three most recently filed annual state,
local and Federal income tax returns, together with all examination reports
and statements of deficiencies assessed against or agreed to by Contributor
during the three calendar year period preceding the date of this Agreement.
Contributor has neither made any payments, is obligated to make any payments,
or is a party to any agreement that under any circumstance could obligate it
to make any payments that will not be deductible under Code section 280G.
(b) Contributor does not intend to dispose of any of the shares of
Pentegra Common Stock to be received hereunder and is not a party to any
plan, arrangement or agreement for the disposition of such shares.
<PAGE>
Contributor and Shareholders have no knowledge, after due inquiry, of any
such intent, plan, arrangement or agreement by any Shareholder. Nothing
contained herein shall prohibit Contributor from selling such shares of
Pentegra Common Stock after the designated holding period and in accordance
with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated
by this Agreement which may be now or hereafter asserted against Pentegra,
Contributor or Contributor's shareholders resulting from any action taken by
Contributor or any Shareholder or their respective agents or employees, or
any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Contributor did not have, as of the Balance
Sheet Date, and has not incurred since that date and will not have incurred
as of the Closing Date, any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
other than those incurred in the ordinary course of business or as set forth
on EXHIBIT 2.16. Contributor and Shareholders do not know, or have
reasonable grounds to know, of any basis for the assertion against
Contributor or any Shareholder as of the Balance Sheet Date, of any claim or
liability of any nature in any amount not fully reflected or reserved against
on the Balance Sheet, or of any claim or liability of any nature arising
since that date other than those incurred in the ordinary course of business
or contemplated by this Agreement. All indebtedness of Contributor
(including without limitation, indebtedness for borrowed money, guaranties
and capital lease obligations) is described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Contributor, each Shareholder and each licensed
professional of Contributor carries property, liability, malpractice,
workers' compensation and such other types of insurance as is customary in
the industry. Valid and enforceable policies in such amounts are outstanding
and duly in force and will remain duly in force through the Closing Date.
All such policies are described in EXHIBIT 2.20 attached hereto and true and
correct copies have been delivered to Pentegra. Neither Shareholders nor
Contributor have not received notice or other communication from the issuer
of any such insurance policy cancelling or amending such policy or
threatening to do so. Neither Contributor, nor any Shareholder nor any
licensed professional employee of Contributor has any outstanding claims,
settlements or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Contributor has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Contributor
Plan," and collectively "Contributor Plans") have been operated and
administered in all material respects in accordance with all applicable laws,
rules and regulations, including without limitation, ERISA, the Internal
Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964,
as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in
Employment Act of 1967, as amended, and the related rules and regulations
adopted by those Federal agencies responsible for the administration of such
laws. No act or failure to act by Contributor has resulted in a "prohibited
transaction" (as defined in ERISA) with respect to the Contributor Plans. No
"reportable event" (as defined in ERISA) has occurred with respect to any of
the Contributor Plans. Contributor has not previously made, is not currently
making, and is not obligated in any way to make, any contributions to any
multiemployer plan within the meaning of the Multi-Employer Pension Plan
Amendments Act of 1980. With respect to each Contributor Plan, either (i)
the value of plan assets (including commitments under insurance contracts) is
at least equal to the value of plan liabilities or (ii) the value of plan
liabilities in excess of plan assets is disclosed on the Balance Sheet, all
as of the Closing Date.
<PAGE>
2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Contributor, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Shareholders and
Contributor's licensed professional employees, and the conduct of the
Business and use of the Assets, have complied with all applicable laws,
rules, regulations and licensing requirements, including, without limitation,
the Federal Environmental Protection Act, the Occupational Safety and Health
Act, the Americans with Disabilities Act and any environmental laws and
medical waste laws, and there exist no violations by Contributor, any
Shareholder or any licensed professional employee of Contributor of any
Federal, state or local law or regulation. Contributor and Shareholders have
not received any notice of a violation of any Federal, state and local laws,
regulations and ordinances relating to the operations of the Business and
Assets and no notice of any pending inspection or violation of any such law,
regulation or ordinance has been received by Contributor.
2.24 THIRD PARTY PAYORS. Contributor, Shareholders and each licensed
professional employee or independent contractor of Contributor has timely
filed all claims or other reports required to be filed with respect to the
purchase of services by third-party payors, and all such claims or reports
are complete and accurate, and has no liability to any payor with respect
thereto. There are no pending appeals, overpayment determinations,
adjustments, challenges, audit, litigation or notices of intent to open
Medicare or Medicaid claim determinations or other reports required to be
filed by Contributor, any Shareholder and each licensed professional employee
of Contributor. Neither Contributor, nor any Shareholder, nor any licensed
professional employee of Contributor has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Contributor, Shareholders and Contributor's licensed professional employees
has not (a) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made
any false statement or representation of a material fact for use in
determining rights to any benefit or payment; (c) failed to disclose
knowledge of the occurrence of any event affecting the initial or continued
right to any benefit or payment on its own behalf or on behalf of another,
with the intent to fraudulently secure such benefit or payment; and (d)
violated any applicable state anti-remuneration or self-referral statutes,
rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Contributor or Shareholders in this Agreement, and no Exhibit or certificate
issued or executed by, or information furnished by, officers or directors of
Contributor or any Shareholder and furnished or to be furnished to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Contributor has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Contributor, or their respective
spouses, children or affiliates, owns directly or indirectly, on an
individual or joint basis, any interest in, has a compensation or other
financial arrangement with, or serves as an officer or director of, any
customer or supplier or competitor of Contributor or any organization that
has
<PAGE>
a material contract or arrangement with Contributor.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Contributor's services which
accounted for more than 10% of revenues of Contributor in the preceding
fiscal year. Contributor has good relations with all such payors and other
material payors of Contributor and none of such payors has notified
Contributor that it intends to discontinue its relationship with Contributor
or to deny any claims submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Contributor and Shareholders
as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Pentegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would
not have a material adverse effect, there are no proceedings pending or, to
the knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has knowledge to the continued operation of its business or the use
of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to
<PAGE>
have been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Contributor or
any Shareholder pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
SECTION 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS.
Contributor and Shareholders, jointly and severally, agree that between
the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Shareholders
shall use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions.
Contributor and Shareholders agree to complete the Exhibits hereto to be
provided by them in form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Contributor and Shareholders shall operate the
Business and use the Assets in the ordinary course. Contributor and
Shareholders shall not enter into any lease, contract, indebtedness,
commitment, purchase or sale or acquire or dispose of any capital asset
relating to the Business or the Assets except in the ordinary course of
business. Contributor and Shareholders shall use their best efforts to
preserve the Business and Assets intact and shall not take any action that
would have an adverse effect on the Business or Assets. Contributor and
Shareholders shall use their best efforts to preserve intact the
relationships with payors, customers, suppliers, patients and others having
significant business relations with Contributor. Contributor and Shareholders
shall collect its receivables and pay its trade payables in the ordinary
course of business. Contributor and Shareholders shall not introduce any new
method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Contributor and Shareholders shall permit
Pentegra and its authorized representatives access to, and make available for
inspection, all of the assets and business of Contributor, the Business and
the Assets, including employees, customers and suppliers and permit Pentegra
and its authorized representatives to inspect and make copies of all
documents, records and information with respect to the business or assets of
Contributor, the Business or the Assets as Pentegra or its representatives
may request. Contributor and Shareholders shall promptly notify Pentegra in
writing of (a) any notice or communication relating to a default or event
that, with notice or lapse of time or both, could become a default, under any
<PAGE>
contract, commitment or obligation to which Contributor is a party or
relating to the Business or the Assets, and (b) any adverse change in
Contributor's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor
and Shareholders shall use their best efforts to secure all necessary
approvals and consents of third parties to the consummation of the
transactions contemplated hereby, including consents described on EXHIBIT
2.4. Contributor and Shareholders shall use their best efforts to obtain all
licenses, permits, approvals or other authorizations required under any law,
rule, regulation, or otherwise to provide the services of Contributor
contemplated by the Service Agreement and to conduct the intended business of
Contributor and operate the Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance
with the provisions hereof, Contributor and Shareholders shall not, and shall
use its best efforts to cause Contributor's employees, agents and
representatives not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer, including without limitation, any proposal or offer to any
Shareholder, with respect to a merger, acquisition, consolidation or similar
transaction involving, or the purchase of all or any significant portion of
the assets or any equity securities of Contributor or engage in any
negotiations concerning, or provide any confidential information or data to,
or have any discussions with, any person relating to such proposal or offer,
and Contributor and Shareholders will immediately cease any such activities,
discussions or negotiations heretofore conducted with respect to any of the
foregoing. Contributor and Shareholders shall immediately notify Pentegra if
any such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby covenants
and agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Contributor or any entity might have any liability
whatsoever arising from any insurance, pension plan, employment tax or
similar liability of Contributor to any employee or other person or entity
(including, without limitation, any Contributor Plan and any liability under
employment contracts with Contributor) allocable to services performed prior
to the Closing Date. Contributor and Shareholders acknowledge that the
purpose and intent of this covenant is to assure that Pentegra shall have no
unfunded liability whatsoever at any time after the Closing Date with respect
to any of Contributor's employees or similar persons or entities, including,
without limitation, any Contributor Plan for the period prior to the Closing
Date.
4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash
compensation of any Shareholder (other than in the ordinary course of
business) or other employee or an independent contractor of Contributor,
adopt, amend or terminate any compensation plan, employment agreement,
independent contractor agreement, employee policies and procedures or
employee benefit plan, take any action that could deplete the assets of any
employee benefit, or fail to pay any premium or contribution due or file any
report with respect to any employee benefit plan, or take any other actions
with respect to its employees or employee matters which might have an adverse
effect upon Contributor, its business, assets or prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Contributor, nor will any repurchase
of any of Contributor's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Shareholders
shall use their best efforts to take, or cause to be taken, all actions
necessary to effect the acquisition contemplated hereby under applicable law.
<PAGE>
4.10 ACCOUNTING AND TAX MATTERS. Contributor and Shareholders will not
change in any material respect the tax or financial accounting methods or
practices followed by Contributor (including any material change in any
assumption underlying, or any method of calculating, any bad debt,
contingency or other reserve), except as may be required by law or generally
accepted accounting principles. Contributor and Shareholders will duly,
accurately and timely (without regard to any extensions of time) file all
returns, information statements and other documents relating to taxes of
Contributor required to be filed by it, and pay all taxes required to be paid
by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Contributor hereby waive any compliance with the applicable state Bulk
Transfers Act, if any. Contributor and Shareholders covenant and agree that
all of the creditors with respect to the Business and the Assets will be paid
in full by Contributor prior to the Closing Date, except to extent that any
liability to such creditors is assumed by Pentegra pursuant to this
Agreement. If required by Pentegra, Contributor and Shareholders shall
furnish Pentegra with proof of payment of all creditors with respect to the
Business and the Assets. Notwithstanding the foregoing, Contributor and
Shareholders may dispute the validity or amount of any such creditor's claim
without being deemed to be in violation of this SECTION 4.11, provided that
such dispute is in good faith and does not unreasonably delay the resolution
of the claim and provided, further that Contributor and Shareholders agree to
indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Contributor leases any of its premises from any
Shareholder or other affiliate of Contributor or any shareholder of
Contributor, Pentegra shall have entered into a building lease (the "Building
Lease") with the owner of such premises on terms and conditions satisfactory
to Pentegra, the terms and conditions of which shall include, without
limitation, (i) a five year initial term plus three five-year renewal
options, (ii) a lease rate equal to the fair market value lease rate, as
agreed to by Pentegra, and (iii) such other provisions to be acceptable to
Pentegra.
4.13 HIRING OF EMPLOYEES. Contributor and Shareholders shall cooperate
with all requests made by Pentegra for the purpose of allowing Pentegra to
hire those non-dental employees of Contributor designated by Pentegra, such
employment to be effective as of the Closing Date. Notwithstanding the
above, Contributor and Shareholders shall remain liable under any Contributor
Plans for any claims incurred by any employees or their spouses or
dependents, and for all compensation, bonuses, benefits and other such items
and other liabilities related to Contributor's employees incurred by
Contributor prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges that
all employees of Contributor hired by Pentegra pursuant to SECTION 4.13
above, shall be treated as "leased employees" (as defined in Code Section
414(n)) of Contributor and shall be treated as Clinic employees for purposes
of eligibility and participation in Contributor Plans.
4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates to
be named as an additional insured on its liability insurance programs,
effective as of the Closing Date.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts
<PAGE>
to secure all necessary approvals and consents of third parties to the
consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS.
Pentegra, Shareholders and Contributor agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Contributor and Shareholders
shall cooperate to promptly prepare and file with the Securities Exchange
Commission ("SEC") the Registration Statement on Form S-1 (or other
appropriate Form) to be filed by Pentegra in connection with its Initial
Public Offering (including the prospectus constituting a part thereof, the
"Registration Statement"). Pentegra shall obtain all necessary state
securities laws or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement and the Contributor and
Shareholders shall furnish all information concerning Contributor and
Shareholders as may be reasonable requested in connection with any such
action.
Contributor and Shareholder represent and warrant that none of the
information or documents supplied or to be supplied by it specifically for
inclusion in the Registration Statement, by exhibit or otherwise, will, at
the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act of 1933, 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, in
light of the circumstances under which they were made, not misleading.
Contributor and Shareholders shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.
Contributor and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by
Pentegra in connection with the preparation of the Registration Statement and
each amendment or supplement thereto, or any other statement, filing, notice
or application made by or on behalf of each such party or any of its
subsidiaries to any governmental entity in connection with the transactions
contemplated by the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Contributor and Shareholders contained herein shall have been true and
correct in all respects when initially made and shall be true and correct in
all respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Contributor and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Contributor and Shareholders
prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Contributor shall have occurred since the
<PAGE>
Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Contributor, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and Pentegra
shall have executed and delivered a Service Agreement (the "Service
Agreement"), in substantially the form attached hereto as EXHIBIT 7.7,
pursuant to which Pentegra will provide management services to the
Contributor. Each Shareholder shall have executed and delivered a Guaranty
Agreement in substantially the form attached as EXHIBIT 4.10 of the Service
Agreement pursuant to which Shareholder shall, among other things, guaranty
the obligations of Contributor under the Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated, and
caused each shareholder of Contributor that has an existing employment
agreement with Contributor to have terminated his or her employment agreement
with Contributor and shall have executed an employment agreement ("Employment
Agreement") with Contributor in form and substance attached hereto as EXHIBIT
7.8 and otherwise satisfactory to Contributor and Pentegra.
7.9 CONSENTS AND APPROVALS. Contributor and Shareholders shall have
obtained all necessary government and other third-party approvals and
consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables
or payables between Contributor and its shareholders or affiliates and
Contributor shall not have any liabilities, including indebtedness,
guaranties and capital leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Contributor and Shareholders shall have named Pentegra
as an additional insured on their liability insurance program in accordance
with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Contributor since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Contributor and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
<PAGE>
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pentegra contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Contributor shall have received all documents,
duly executed in form satisfactory to Contributor and its counsel, referred
to in SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. Within five business
days after requested by Pentegra, Contributor and Shareholders shall deliver
to Pentegra the following, all of which shall be in a form satisfactory to
counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel
for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or
letter agreement in form and substance mutually acceptable to the parties
hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of
Contributor authorizing the execution, delivery and performance of this
Agreement, the Service Agreement, the Employment Agreements and all related
documents and agreements each certified by the Secretary as being true and
correct copies of the original thereof;
(d) a bill of sale conveying the Assets to Pentegra;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(f) certificates of the Shareholders and a duly authorized officer
of Contributor dated as of the
<PAGE>
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Contributor and Shareholder contained herein; (ii) as to the
performance of and compliance by Contributor and Shareholder with all
covenants contained herein; and (iii) certifying that all conditions
precedent of Contributor and Shareholders to the Closing have been satisfied;
(g) a certificate of the Secretary of Contributor certifying as to
the incumbency of the directors and officers of Contributor and as to the
signatures of such directors and officers who have executed documents
delivered at the Closing on behalf of Contributor;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Contributor and any state of
required foreign qualification of Contributor establishing that Contributor
is in existence and is in good standing to transact business in its state of
incorporation;
(i) an opinion of counsel to Contributor and Shareholder opining as
to the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Contributor, the enforceability of this Agreement and the other agreements
and documents to be executed in connection herewith, and other matters
reasonably requested by Pentegra;
(j) non-foreign affidavits executed by Contributor;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Contributor, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Contributor and Shareholder, the following, all of which
shall be in a form satisfactory to counsel to Contributor and Shareholders
and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in
escrow pending Closing, pursuant to an escrow agreement or letter agreement
in form and substance mutually acceptable to the parties hereto:
(a) the Acquisition Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
<PAGE>
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Contributor;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Contributor;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Contributor to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit attached hereto, any agreement executed pursuant hereto, and
any certificate executed and delivered by any party pursuant to the terms of
this Agreement, shall constitute representations and warranties of
Contributor and Shareholders, jointly and severally, or of Pentegra, as the
case may be. All such representations and warranties, and all
representations and warranties expressly labeled as such in this Agreement
shall survive the date of this Agreement and the Closing Date for a period of
five (5) years following the Closing Date, except that (i) the
representations and warranties with respect to environmental and medical
waste laws and health care laws and matters shall survive for a period of
fifteen (15) years and tax representations shall survive until one year after
the expiration of the applicable statute of limitations. Each party covenants
with the other parties not to make any claim with respect to such
representations and warranties, against any party after the date on which
such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof,
unless such party has timely given the notice required in SECTION 10.2, 10.3
or 10.4 hereof, as the case may be. Each party hereby releases, acquits and
discharges the other party from any and all claims and demands, actions and
causes of action, damages, costs, expenses and rights of setoff with respect
to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable,
are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD CONTRIBUTOR AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES
(EACH OF THE FOREGOING, INCLUDING CONTRIBUTOR AND SHAREHOLDERS, FOR PURPOSES
OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN
"INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES,
LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING,
BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH
APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO
<PAGE>
BE FURNISHED BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. CONTRIBUTOR AND
SHAREHOLDERS (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT
APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL
INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS,
SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND
EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR
WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER, AND
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS WHETHER ON OR
AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY CONTRIBUTOR OR ITS SHAREHOLDERS OR THEIR
CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE
OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR
OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE CONTRIBUTOR OR
SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD
<PAGE>
PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF CONTRIBUTOR OR ANY SHAREHOLDER OR ANY OTHER PERSON OR
ENTITY RELATED TO OR AFFILIATED WITH THE CONTRIBUTOR OR SHAREHOLDER ARISING
FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF CONTRIBUTOR OR THE SHAREHOLDERS FOR COSTS AND
EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN
CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN
CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS
SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE CONTRIBUTOR OR
ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS,
THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
CONTRIBUTOR OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO
MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the
defense of such action or proceeding, such Indemnified Person shall notify
Indemnitor thereof. If any such action or other proceeding shall be brought
against any Indemnified Person, Indemnitor shall, upon written notice given
within a reasonable time following receipt by Indemnitor of such notice from
Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall
<PAGE>
not, without the prior written consent of any Indemnified Person, settle or
compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding to which such Indemnified Person is a
party unless such settlement, compromise or consent includes an unconditional
release of such Indemnified Person from all liability arising or potentially
arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Contributor or any Shareholder
giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof,
Pentegra shall be entitled to offset the amount of damages incurred by it as
a result of such breach of warranty, representation, covenant or agreement
against any amounts payable by Pentegra, including the amounts payable under
the Service Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of
Contributor or Shareholder contained in this Agreement or in any certificate
or other document executed and delivered by Contributor or any Shareholder
pursuant to this Agreement is or becomes untrue or breached in any material
respect or if Contributor or any Shareholder fails to comply in any material
respect with any covenant or agreement contained herein, and any such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;
(c) at any time by Contributor or any Shareholder if any representation
or warranty of Pentegra contained in this Agreement or in any certificate or
other document executed and delivered by Pentegra pursuant to this Agreement
is or becomes untrue or breached in any material respect or if Pentegra fails
to comply in any material respect with any covenant or agreement contained
herein and such misrepresentation, noncompliance or breach is not cured,
waived or eliminated within twenty (20) days after receipt of written notice
thereof;
(d) by Pentegra, Shareholders or Contributor if the transaction
contemplated hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Contributor, that such termination
is desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Contributor shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares
of Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer
shall be treated as effective for any purpose or (b) engage in any
transaction, whether or not with respect to any shares of Pentegra Common
Stock or any interest therein, the intent or effect of which is to reduce the
risk of owning shares of Pentegra Common Stock. The certificates evidencing
the Pentegra Common Stock delivered to Contributor pursuant to the terms
hereof will bear a legend substantially in the form set forth below and
containing such other information as Pentegra may deem necessary or
appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged,
<PAGE>
transferred, encumbered, pledged, distributed, appointed or otherwise
disposed of, and the issuer shall not be required to give effect to
any attempted voluntary sale, assignment, exchange, transfer,
encumbrance, pledge, distribution, appointment or other disposition
prior to _________ [date that is one year from the Closing Date].
Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order
placed with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Shareholders
acknowledge that the shares of Pentegra Common Stock to be delivered to
Contributor pursuant to this Agreement have not been and will not be
registered under the Securities Act of 1933 and may not be resold without
compliance with the Securities Act of 1933. The Pentegra Common Stock to be
acquired by Contributor pursuant to this Agreement is being acquired solely
for its own account, for investment purposes only and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution. Contributor covenants, warrants and represents that
none of the shares of Pentegra Common Stock issued to it will be offered,
sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
except after full compliance with all of the applicable provisions of the
Securities Act, as amended, and the rules and regulations of the Securities
Exchange Commission and applicable state securities laws and regulations.
All certificates evidencing shares of Pentegra Common Stock shall bear the
following legend in addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock
shall bear any legend required by the securities or blue sky laws of any
state where Contributor resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Shareholders are
able to bear the economic risk of an investment in Pentegra Common Stock
acquired pursuant to this Agreement and can afford to sustain a total loss of
such investment and have such knowledge and experience in financial and
business matters that they are capable of evaluating the merits and risks of
the proposed investment and therefore have the capacity to protect their own
interests in connection with the acquisition of the Pentegra Common Stock.
Contributor, Shareholders and their representatives have had an adequate
opportunity to ask questions and receive answers from the officers of
Pentegra concerning any and all matters relating to the background and
experience of the officers and directors of Pentegra, the plans for the
operations of the business of Pentegra, and any plans for additional
acquisitions and the like. Contributor, Shareholders and their
representatives have asked any and all questions in the nature described in
the preceding sentence and all questions have been answered to their
satisfaction. Contributor and Shareholders are "accredited investors" as
defined in Regulation D of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Contributor and Shareholders agree that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally
through no fault of Contributor or Shareholders, (ii) disclosure is required
by law or the order of any governmental authority under color of law,
provided, that prior to disclosing any information pursuant to this clause
(ii), Contributor and Shareholders shall, if possible, give prior written
notice thereof to the other parties hereto, and provide such other parties
hereto with the opportunity to contest such disclosure, (iii) Contributor and
Shareholders reasonably believe that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party, or
(iv)
<PAGE>
Contributor and Shareholders are the sole and exclusive owner of such
confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Contributor or Shareholders of the provisions of this SECTION 13, Pentegra
shall be entitled to an injunction restraining Contributor and Shareholders
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Pentegra from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. The obligations of the parties under this SECTION 13 shall
survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement, together with the transactions contemplated by the Other
Agreement and the Initial Public Offering, will qualify as an exchange
meeting the requirements of Section 351 of the Code. The tax returns (and
schedules thereto) of Shareholders, Contributor and Pentegra shall be filed
in a manner consistent with such intention and Contributor and Pentegra shall
each provide the other with such tax information, reports, returns or
schedules as may be reasonably required to assist the other in so reporting
the transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Contributor or Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the
<PAGE>
overnight courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Contributor or any Shareholder for
services rendered in connection with negotiating and closing the transactions
contemplated by this Agreement or the documents to be executed in connection
herewith, whether or not such costs or expenses are incurred before or after
the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Contributor.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF
CONTRIBUTOR AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS
PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one and the
same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder
<PAGE>
without the prior written consent of the other parties; provided, however,
that Pentegra may assign its rights and delegate its obligations hereunder to
any entity that is an affiliate of Pentegra. For purposes of this Agreement
an "affiliate" of Pentegra shall include any entity that, through one or more
intermediaries is, controlled, controlled by or under common control with,
Pentegra. Upon any such assignment prior to the Closing, all references
herein to Pentegra (including those to Pentegra Common Stock) shall be deemed
to include references to the assignee and the assignee's common stock.
Notwithstanding any such assignment, Pentegra shall not, absent a written
release from Contributor, be relieved from its obligations to Contributor
under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Contributor, on the other hand, file suit in any court against any
other party to enforce the terms of this Agreement against the other party or
to obtain performance by it hereunder, the prevailing party will be entitled
to recover all reasonable costs, including reasonable attorneys' fees, from
the other party as part of any judgment in such suit. The term "prevailing
party" shall mean the party in whose favor final judgment after appeal (if
any) is rendered with respect to the claims asserted in the Complaint.
"Reasonable attorneys' fees" are those reasonable attorneys' fees actually
incurred in obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at
Closing a pro rata portion of all taxes levied upon the Assets for the
calendar year in which the Closing occurs. Such taxes shall be estimated,
apportioned and pro-rated among Contributor and Pentegra as of the Closing
Date, and the prorated amount due Pentegra shall be credited to the cash
portion of the Purchase Consideration. Upon payment by Pentegra of such
taxes actually assessed and paid on the Assets, Pentegra shall calculate the
apportionment of such taxes and shall pay Contributor or may demand from
Contributor, and Contributor agrees to pay, the amount necessary to correct
the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Contributors or Shareholders (hereinafter referred to as a "Party"), whether
made before or after the institution of any legal proceeding, any dispute
among the parties hereto in any way arising out of, related to, or in
connection with this Agreement (hereinafter a "Dispute"), shall be resolved
by binding arbitration in accordance with the terms of this Section
(hereinafter the "Arbitration Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or foreclosing upon any
personal property in which there has been granted a security interest or lien
by a Party in the Documents. In Disputes involving indebtedness or other
monetary obligations, each Party agrees that the other Party may proceed
against all liable persons, jointly and severally against one or more of
them, without impairing rights against other liable persons. Nor shall a
Party be required to join the principal obligor or any other liable persons
(e.g., sureties or guarantors) in any proceeding against a particular person.
A Party may release or settle with one or more liable persons as the Party
deems fit without releasing or impairing rights to proceed against any
<PAGE>
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoenix,
Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or by
applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
Susan E. Lunson, D.D.S., P.C.
By: /s/ Susan E. Lunson, D.D.S.
--------------------------------------
Its: Pres./Sec.
--------------------------------------
PENTEGRA DENTAL GROUP, INC.
By: /s/ James L. Dunn, Jr.
--------------------------------------
Its: Senior Vice President
--------------------------------------
/s/ Susan E. Lunson, D.D.S.
------------------------------------------
Susan E. Lunson, D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment
Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
RICHARD W. MAINS, JR., D.M.D., P.C.
and
RICHARD W. MAINS, JR., D.M.D.
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . 3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . 8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . .10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . .10
<PAGE>
Section 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . .10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . .10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . .10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . .10
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . .11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . .11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . .11
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . .11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . .11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . .11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . .12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . .12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . .12
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . .12
Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . .12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . .13
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . .13
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . .13
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . .13
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . .13
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . .13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . .13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . .13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . .13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . .13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . .13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . .14
Section 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . .14
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . .14
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . .14
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . .14
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . . . . .14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . .15
<PAGE>
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . .16
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . .16
10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS . . . . . . . . . . .17
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . .18
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . .19
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . .19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . .20
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . .21
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . .21
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . .21
14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . .21
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . .21
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . .21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . .22
14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . .22
14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . .22
14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed
as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra"), RICHARD W. MAINS, D.M.D., JR., P.C., a New
York professional corporation ("Contributor") and RICHARD W. MAINS, D.M.D.,
JR., shareholder of Contributor (referred to herein as "Shareholder" or
"Shareholders").
WITNESSETH:
WHEREAS, Contributor operates a dental practice ("Business") and Pentegra
is engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra
desires to receive from Contributor, certain assets of Contributor;
WHEREAS, Pentegra or its affiliated designee has entered into or intends to
enter into Agreements and Plans of Reorganization, Asset Contribution Agreements
and other acquisition agreements (collectively, the "Other Agreements") with
such persons or entities or the stockholders of such entities listed on EXHIBIT
A (together with Contributor, the "Target Companies");
WHEREAS, it is intended for Federal income tax purposes that the transfers
contemplated by this Agreement, the Other Agreements and Pentegra's initial
public offering ("Initial Public Offering") of shares of its common stock, par
value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange
within the meaning of Section 351 of the Internal Revenue Code of 1986, as
amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., or in such other manner as is mutually agreed upon by the parties, on
the day on which the Initial Public Offering of Pentegra Common Stock is
consummated. The date on which the Closing occurs is hereinafter referred to as
the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions
contained herein, on the Closing Date, Contributor shall convey, transfer,
deliver and assign to Pentegra or any affiliate of Pentegra designated by
Pentegra all of Contributor's right, title and interest in and to those certain
assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and
collectively "Assets"), free and clear of all obligations, security interests,
claims, liens and encumbrances, except as specifically assumed, or taken subject
to, by
<PAGE>
Pentegra pursuant to SECTION 1.3(b) hereof.
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and contributed hereunder, and Contributor shall retain all of its
right, title and interest in and to, the assets not specifically transferred
hereunder, including without limitation, the assets described on EXHIBIT 1.2
(the "Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Contributor
contained herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Contributor the consideration
specified in ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Contributor listed on EXHIBIT
1.3(b) attached hereto to the extent that such obligations, commitments,
liabilities and indebtedness are current and not otherwise in default. (the
"Assumed Liabilities"). Notwithstanding any contrary provision contained
herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume:
(i) any liability, commitment or obligation or trade payable or indebtedness not
specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on
EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under
such contracts, leases, commitments or obligations which occurred on or before
the Closing Date; (iii) any liability for any employee benefits payable to
employees of Contributor, including, but not limited to, liabilities arising
under any Contributor Plan (as defined in SECTION 2.21 hereof); (iv) any
liability based upon or arising out of a violation of any antitrust or similar
restraint-of-trade laws by any Shareholder or Contributor which may arise in
connection with agreements, contracts, commitments or orders for the sale of
goods or provision of services by Contributor reflected on the books of
Contributor at or prior to the Closing Date; (v) any liability based upon or
arising out of any tortious or wrongful actions of Contributor, any licensed
professional employee or independent contractor of Contributor or any
Shareholder, (vi) any liability for the payment of any taxes of Contributor or
any Shareholder, including without limitation, transfer taxes and income taxes
arising from or by reason of the transactions contemplated by this Agreement;
(vii) any indebtedness secured by deeds of trust or mortgages on real property;
nor (viii) any liability incurred or to be incurred pursuant to any malpractice
or other suits or actions pending against Contributor or any Shareholder.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement,
Contributor and Shareholders shall execute and deliver all such deeds, bills of
sale, assignments and assurances and take and do all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under the Assets in Pentegra or otherwise
to carry out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS.
Contributor and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Contributor is a professional
corporation or association, as applicable, duly organized, validly existing and
in good standing under the laws of the State of
<PAGE>
New York. Contributor has all necessary corporate powers to own all of its
assets and to carry on its business as such business is now being conducted.
Contributor does not own stock in or control, directly or indirectly, any
other corporation, association or business organization, nor is Contributor a
party to any joint venture or partnership. The Shareholders are the sole
shareholders of Contributor and own all outstanding shares of capital stock
free of all security interests, claims, encumbrances and liens in the amounts
set forth on EXHIBIT 2.1. Each share of Contributor's common stock has been
legally and validly issued and fully paid and nonassessable. No shares of
capital stock of Contributor are owned by Contributor in treasury. There are
no outstanding (a) bonds, debentures, notes or other obligations the holders
of which have the right to vote with the stockholders of Contributor on any
matter, (b) securities of Contributor convertible into equity interests in
Contributor, or (c) commitments, options, rights or warrants to issue any
such equity interests in Contributor, to issue securities of Contributor
convertible into such equity interests, or to redeem any securities of
Contributor. No shares of capital stock of Contributor have been issued or
disposed of in violation of the preemptive rights, rights of first refusal or
similar rights of any of Contributor's stockholders. Contributor is not
required to qualify to do business as a foreign corporation in any other
state or jurisdiction by reason of its business, properties or activities in
or relating to such other state or jurisdiction. Contributor does not have
any assets, employees or offices in any state other than the state set forth
in the first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the corporate
power to execute, deliver and perform this Agreement and all agreements and
other documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all action required by
law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to
authorize the execution, delivery and performance of this Agreement and such
related documents. Each Shareholder has the legal capacity to enter into and
perform this Agreement and the other agreements to be executed and delivered in
connection herewith. Contributor has obtained the approval of its stockholders
necessary to the consummation of the transactions contemplated herein. This
Agreement and all agreements and documents executed and delivered in connection
herewith have been, or will be as of the Closing Date, duly executed and
delivered by Contributor and Shareholders, as appropriate, and constitute or
will constitute the legal, valid and binding obligations of Contributor and
Shareholders, enforceable against Contributor and Shareholders in accordance
with their respective terms, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies. The execution and delivery of this
Agreement, and the agreements executed and delivered pursuant to this Agreement
or to be executed and delivered on the Closing Date, do not, and, subject to the
receipt of consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, violate any provision of the Articles or
Certificate of Incorporation or Bylaws of Contributor or any provisions of, or
result in the acceleration of, any obligation under any mortgage, lien, lease,
agreement, rent, instrument, order, arbitration award, judgment or decree to
which Contributor or any Shareholder is a party or by which Contributor or any
Shareholder is bound, or violate any material restrictions of any kind to which
Contributor is subject, or result in any lien or encumbrance on any of
Contributor's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets, or
waivers thereof, have been duly obtained and are in full force and effect and
are described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Contributor and Shareholders, threatened, which may result in the
revocation, cancellation or suspension, or any adverse modification, of any such
licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Contributor or Shareholders.
<PAGE>
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been declared or paid by Contributor on any of its capital stock
since the Balance Sheet Date. No repurchase of any of Contributor's capital
stock has been approved, effected or is pending, or is contemplated by
Contributor.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Contributor and all
amendments thereto have been delivered to Pentegra. The minute books of
Contributor contain accurate minutes of all meetings of and consents to actions
taken without meetings of the Board of Directors and stockholders of Contributor
since its formation. The books of account of Contributor have been kept
accurately in the ordinary course of business and the revenues, expenses, assets
and liabilities of Contributor have been properly recorded in such books.
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore
furnished Pentegra with copies of its unaudited balance sheet and related
unaudited statements of income, retained earnings and cash flows for its prior
two full fiscal years, as well as copies of its unaudited balance sheet as of
December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the
latest date thereof shall be referred to as the "Balance Sheet Date") and any
related unaudited statements of income, retained earnings, schedule of accounts
receivable, accounts payable and accrued liabilities, and cash flows for the
twelve months then ended (collectively, with the related notes thereto, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and results of operations of Contributor as of the dates and for the
periods indicated and reflect all fixed and contingent liabilities of
Contributor.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Contributor or any Shareholder leases, as lessor or lessee,
real or personal property used in operating the Business or related to the
Assets. All such leases listed on EXHIBIT 2.8 are valid and enforceable in
accordance with their respective terms, and there is not under any such lease
any existing default by Contributor, as lessor or lessee, or any condition or
event of which any Shareholder or Contributor has knowledge which with notice or
lapse of time, or both, would constitute a default, in respect of which
Contributor or Shareholders have not taken adequate steps to cure such default
or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Contributor and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good, valid
and marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all encumbrances
set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to the Closing Date and evidence of
such releases of liens and claims shall be provided to Pentegra on the Closing
Date and the Assets shall not be used to satisfy such liens, claims or
encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned or
used by Contributor, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Contributor has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT
2.12 is a listing of all names of all predecessor companies of Contributor,
including the names of any entities from whom Contributor previously acquired
significant assets. Except for off-the-shelf software licenses and except as
set forth on EXHIBIT 2.12,
<PAGE>
Contributor is not a licensee in respect of any patents, trademarks, service
marks, trade names, copyrights or applications therefor, or manufacturing
processes, formulas or trade secrets or similar items and no such licenses
are necessary for the conduct of the Business or the use of the Assets. No
claim is pending or has been made to the effect that the Assets or the
present or past operations of Contributor in connection with the Assets or
Business infringe upon or conflict with the asserted rights of others to any
patents, patent rights, manufacturing processes, trade names, trademarks,
service marks, inventions, licenses, specialized treatment protocols,
copyrights, formulas, know-how and trade secrets. Contributor has the sole
and exclusive right to use all Assets constituting proprietary rights without
infringing or violating the rights of any third parties and no consents of
any third parties are required for the use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on
EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this
Agreement of: (a) the name of each director and officer of Contributor and the
offices held by each, (b) the most recent payroll report of Contributor, showing
all current employees of Contributor and their current levels of compensation,
(c) promised increases in compensation of employees of Contributor that have not
yet been effected, (d) oral or written employment agreements, consulting
agreements or independent contractor agreements (and all amendments thereto) to
which Contributor is a party, copies of which have been delivered to Pentegra,
and (e) all employee manuals, materials, policies, procedures and work-related
rules, copies of which have been delivered to Pentegra. Contributor is in
compliance with all applicable laws, rules, regulations and ordinances
respecting employment and employment practices. Contributor has not engaged in
any unfair labor practice. There are no unfair labor practices charges or
complaints pending or threatened against Contributor, and Contributor has never
been a party to any agreement with any union, labor organization or collective
bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Contributor nor the
Business nor any of the Assets is subject to any pending, nor does Contributor
or any Shareholder have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Contributor, any Shareholder, the Business, the Assets or the
transactions contemplated by this Agreement, and, to the knowledge of
Contributor and Shareholders, no basis for any such action exists, nor is there
any legal impediment of which Contributor or any Shareholder has knowledge to
the continued operation of its business or the use of the Assets in the ordinary
course, subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts, obligations
and commitments of Contributor ("Contracts"), entered into in connection with
and related to the Assets or the Business, all of which are listed or
incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13
(in the case of employment agreements) and EXHIBIT 2.15 (in the case of
Contracts other than leases) attached hereto. Except as otherwise indicated on
such Exhibits, all of such Contracts are valid, binding and enforceable in
accordance with their terms and are in full force and effect, and no defenses,
offsets or counterclaims have been asserted or may be made by any party thereto.
Except as indicated on such Exhibits, there is not under any such Contract any
existing default by Contributor or any Shareholder, or any condition or event of
which Contributor or any Shareholder has knowledge which with notice or lapse of
time, or both, would constitute a default by Contributor. Contributor and
Shareholders have no knowledge of any default by any other party to such
Contracts. Contributor and Shareholders have not received notice of the
intention of any party to any Contract to cancel or terminate any Contract and
have no reason to believe that any amendment or change to any Contract is
contemplated by any party thereto. Other than those contracts, obligations and
commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Contributor
are not a party to any material written or oral agreement contract, lease or
arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
<PAGE>
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product or
service;
(h) Loan agreement or other contract for money borrowed or lent or to
be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of the
Contributor or Shareholders, oral or written, that provide for prepayments or
deferred installment payments (other than in the ordinary course of business
consistent with past practices); or
(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Contributor on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16,
Contributor has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) or entered into any contract, lease, license or
commitment, except in connection with the performance of this Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued, contingent
or otherwise) other than (i) liabilities shown or reflected on the Balance
Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary
course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(d) Made any payments to or loaned any money to any person or entity
other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have been
required due to income or operations of Contributor since the Balance Sheet
Date;
<PAGE>
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants or
agents, or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of any officer, employee, consultant or agent;
(j) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties, assets
or business or the Business or the Assets, or experienced any other material
adverse change in its financial condition, assets, prospects, liabilities or
business;
(n) Declared or paid a distribution, payment or dividend of any kind
on the capital stock of Contributor;
(o) Repurchased, approved any repurchase or agreed to repurchase any
of Contributor's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Contributor has filed all tax returns (including tax
reports and other statements) required to have been filed by it, and has paid
all taxes (including any interest, penalty or additions thereto) required to
have been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Contributor has not received any notice that any tax deficiency or
delinquency has been or may be asserted against Contributor. There are no
audits relating to taxes of Contributor pending or in process or, to the
knowledge of Contributor, threatened. Contributor is not currently the
beneficiary of any waiver of any statute of limitations in respect of taxes nor
of any extension of time within which to file any tax return or to pay any tax
assessment or deficiency. There are no liens or encumbrances relating to taxes
on or threatened against any of the assets of Contributor. Contributor has
withheld and paid all taxes required by law to have been withheld and paid by
it. Contributor is not and has not been a party to any tax allocation or
sharing agreement or a member of an affiliated group of corporations filing a
consolidated Federal income tax return. Contributor has delivered to Pentegra
correct and complete copies of Contributor's three most recently filed annual
state, local and Federal income tax returns, together with all examination
reports and statements of deficiencies assessed against or agreed to by
Contributor during the three calendar year period preceding the date of this
Agreement. Contributor has neither made any payments, is obligated to make any
payments, or is a party to any agreement that under any circumstance could
obligate it to make any payments that will not be deductible under Code section
280G.
(b) Contributor does not intend to dispose of any of the shares of
Pentegra Common Stock to be
<PAGE>
received hereunder and is not a party to any plan, arrangement or agreement
for the disposition of such shares. Contributor and Shareholders have no
knowledge, after due inquiry, of any such intent, plan, arrangement or
agreement by any Shareholder. Nothing contained herein shall prohibit
Contributor from selling such shares of Pentegra Common Stock after the
designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated by
this Agreement which may be now or hereafter asserted against Pentegra,
Contributor or Contributor's shareholders resulting from any action taken by
Contributor or any Shareholder or their respective agents or employees, or any
of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against
on the Balance Sheet or as set forth on EXHIBIT 2.19, Contributor did not have,
as of the Balance Sheet Date, and has not incurred since that date and will not
have incurred as of the Closing Date, any liabilities or obligations of any
nature, whether accrued, absolute, contingent or otherwise, and whether due or
to become due, other than those incurred in the ordinary course of business.
Contributor and Shareholders do not know, or have reasonable grounds to know, of
any basis for the assertion against Contributor or any Shareholder as of the
Balance Sheet Date, of any claim or liability of any nature in any amount not
fully reflected or reserved against on the Balance Sheet, or of any claim or
liability of any nature arising since that date other than those incurred in the
ordinary course of business or contemplated by this Agreement. All indebtedness
of Contributor (including without limitation, indebtedness for borrowed money,
guaranties and capital lease obligations) is included on the Balance Sheet or is
described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Contributor, each Shareholder and each licensed
professional of Contributor carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the industry.
Valid and enforceable policies in such amounts are outstanding and duly in force
and will remain duly in force through the Closing Date. All such policies are
described in EXHIBIT 2.20 attached hereto and true and correct copies have been
delivered to Pentegra. Neither Shareholders nor Contributor have not received
notice or other communication from the issuer of any such insurance policy
canceling or amending such policy or threatening to do so. Neither Contributor,
nor any Shareholder nor any licensed professional employee of Contributor has
any outstanding claims, settlements or premiums owed against any insurance
policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached
hereto, Contributor has neither established, nor maintains, nor is obligated to
make contributions to or under or otherwise participate in, (a) any bonus or
other type of compensation or employment plan, program, agreement, policy,
commitment, contract or arrangement (whether or not set forth in a written
document); (b) any pension, profit-sharing, retirement or other plan, program or
arrangement; or (c) any other employee benefit plan, fund or program, including,
but not limited to, those described in SECTION 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). All such plans listed on
EXHIBIT 2.20 (individually "Contributor Plan," and collectively "Contributor
Plans") have been operated and administered in all material respects in
accordance with all applicable laws, rules and regulations, including without
limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of
the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended,
the Age Discrimination in Employment Act of 1967, as amended, and the related
rules and regulations adopted by those Federal agencies responsible for the
administration of such laws. No act or failure to act by Contributor has
resulted in a "prohibited transaction" (as defined in ERISA) with respect to the
Contributor Plans. No "reportable event" (as defined in ERISA) has occurred
with respect to any of the Contributor Plans. Contributor has not previously
made, is not currently making, and is not obligated in any way to make, any
contributions to any multiemployer plan within the meaning of the Multi-Employer
Pension Plan Amendments Act of 1980. With respect to each Contributor Plan,
either (i) the value of plan assets (including commitments under insurance
contracts) is at least equal to the value of plan liabilities or (ii) the value
of plan liabilities in excess of plan assets is disclosed on the Balance Sheet,
all as of the Closing Date.
<PAGE>
2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any charter
or other corporate restriction or any judgment, order, writ, injunction, decree,
rule or regulation that materially and adversely affects the condition
(financial or otherwise), operations, assets, liabilities, business or prospects
of Contributor, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Shareholders and
Contributor's licensed professional employees, and the conduct of the Business
and use of the Assets, have complied with all applicable laws, rules,
regulations and licensing requirements, including, without limitation, the
Federal Environmental Protection Act, the Occupational Safety and Health Act,
the Americans with Disabilities Act and any environmental laws and medical waste
laws, and there exist no violations by Contributor, any Shareholder or any
licensed professional employee of Contributor of any Federal, state or local law
or regulation. Contributor and Shareholders have not received any notice of a
violation of any Federal, state and local laws, regulations and ordinances
relating to the operations of the Business and Assets and no notice of any
pending inspection or violation of any such law, regulation or ordinance has
been received by Contributor.
2.24 THIRD PARTY PAYORS. Contributor, Shareholders and each licensed
professional employee or independent contractor of Contributor has timely
filed all claims or other reports required to be filed with respect to the
purchase of services by third-party payors, and all such claims or reports
are complete and accurate, and has no liability to any payor with respect
thereto. There are no pending appeals, overpayment determinations,
adjustments, challenges, audit, litigation or notices of intent to open
Medicare or Medicaid claim determinations or other reports required to be
filed by Contributor, any Shareholder and each licensed professional employee
of Contributor. Neither Contributor, nor any Shareholder, nor any licensed
professional employee of Contributor has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Contributor, Shareholders and Contributor's licensed professional employees
has not (a) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made
any false statement or representation of a material fact for use in
determining rights to any benefit or payment; (c) failed to disclose
knowledge of the occurrence of any event affecting the initial or continued
right to any benefit or payment on its own behalf or on behalf of another,
with the intent to fraudulently secure such benefit or payment; and (d)
violated any applicable state anti-remuneration or self-referral statutes,
rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Contributor or Shareholders in this Agreement, and no Exhibit or certificate
issued or executed by, or information furnished by, officers or directors of
Contributor or any Shareholder and furnished or to be furnished to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Contributor has with any bank or other
financial institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
director or stockholder of Contributor, or their respective spouses, children or
affiliates, and to the best of Contributor's knowledge, no employee of
Contributor, or such employee's respective spouse, children or affiliates, owns
<PAGE>
directly or indirectly, on an individual or joint basis, any interest in, has a
compensation or other financial arrangement with, or serves as an officer or
director of, any customer or supplier or competitor of Contributor or any
organization that has a material contract or arrangement with Contributor.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of
the names and addresses of each payor of Contributor's services which accounted
for more than 10% of revenues of Contributor in the preceding fiscal year.
Contributor has good relations with all such payors and other material payors of
Contributor and none of such payors has notified Contributor that it intends to
discontinue its relationship with Contributor or to deny any claims submitted to
such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Contributor and Shareholders as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions required
by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize
the execution, delivery and performance of this Agreement and such related
documents. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing Date,
duly executed and delivered by Pentegra and constitute or will constitute the
legal, valid and binding obligations of Pentegra, enforceable against Pentegra
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and delivery
of this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and, the
consummation of the actions contemplated hereby will not, violate any provision
of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or decree
to which Pentegra is a party or by which Pentegra is bound, or violate any
material restrictions of any kind to which Pentegra is subject, or result in any
lien or encumbrance on any of Pentegra's assets. Other than as have been
obtained or as would not have a material adverse effect, there are no consents
of any person or entity required for the transaction contemplated hereby on
behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Pentegra or waivers
thereof in all jurisdictions where Pentegra is or will perform services, have
been duly obtained and are in full force and effect, except as would not have a
material adverse effect upon Pentegra. Other than as would not have a material
adverse effect, there are no proceedings pending or, to the knowledge of
Pentegra, threatened, which may result in the revocation, cancellation or
suspension, or any adverse modification, of any such licenses or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any pending,
nor does Pentegra have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Pentegra, its business, assets or the transactions contemplated by
this Agreement, and, to the knowledge of Pentegra, no basis for any such action
exists, nor is there any legal impediment of which Pentegra has
<PAGE>
knowledge to the continued operation of its business or the use of its Assets
in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports and
other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it, other than as would not have a material adverse effect. Pentegra
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Pentegra. There are no audits relating to taxes of
Pentegra pending or in process or, to the knowledge of Pentegra, threatened.
Pentegra is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra
in this Agreement, and no Exhibit or certificate issued by officers or directors
of Pentegra and furnished or to be furnished to Contributor or any Shareholder
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
SECTION 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS.
Contributor and Shareholders, jointly and severally, agree that between the
date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Shareholders
shall use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Contributor
and Shareholders agree to complete the Exhibits hereto to be provided by them in
form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Contributor and Shareholders shall operate the
Business and use the Assets in the ordinary course. Contributor and
Shareholders shall not enter into any lease, contract, indebtedness, commitment,
purchase or sale or acquire or dispose of any capital asset relating to the
Business or the Assets except in the ordinary course of business. Contributor
and Shareholders shall use their best efforts to preserve the Business and
Assets intact and shall not take any action that would have a material adverse
effect on the Business or Assets. Contributor and Shareholders shall use their
best efforts to preserve intact the relationships with payors, customers,
suppliers, patients and others having significant business relations with
Contributor. Contributor and Shareholders shall collect its receivables and pay
its trade payables in the ordinary course of business. Contributor and
Shareholdes shall not introduce any new method of management, operations or
accounting.
4.3 ACCESS AND NOTICE. Contributor and Shareholders shall permit Pentegra
and its authorized representatives access to, and make available for inspection,
all of the assets and business of Contributor, the Business and the Assets,
including employees, customers and suppliers and permit Pentegra and its
authorized representatives to inspect and make copies of all documents, records
and information with respect to the
<PAGE>
business or assets of Contributor, the Business or the Assets as Pentegra or
its representatives may request. Contributor and Shareholders shall promptly
notify Pentegra in writing of (a) any notice or communication relating to a
default or event that, with notice or lapse of time or both, could become a
default, under any contract, commitment or obligation to which Contributor is
a party or relating to the Business or the Assets, and (b) any adverse change
in Contributor's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor and
Shareholders shall use their best efforts to secure all necessary approvals and
consents of third parties to the consummation of the transactions contemplated
hereby, including consents described on EXHIBIT 2.4. Contributor and
Shareholders shall use their best efforts to obtain all licenses, permits,
approvals or other authorizations required under any law, rule, regulation, or
otherwise to provide the services of Contributor contemplated by the Service
Agreement and to conduct the intended business of Contributor and operate the
Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of Closing or the termination of this Agreement in accordance with the
provisions hereof, Contributor and Shareholders shall not, and shall use its
best efforts to cause Contributor's employees, agents and representatives not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer, including without limitation,
any proposal or offer to any Shareholder, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of Contributor or
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to such proposal
or offer, and Contributor and Shareholders will immediately cease any such
activities, discussions or negotiations heretofore conducted with respect to any
of the foregoing. Contributor and Shareholders shall immediately notify
Pentegra if any such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby covenants
and agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Contributor or any entity might have any liability whatsoever
arising from any insurance, pension plan, employment tax or similar liability
of Contributor to any employee or other person or entity (including, without
limitation, any Contributor Plan and any liability under employment contracts
with Contributor) allocable to services performed prior to the Closing Date.
Contributor and Shareholders acknowledge that the purpose and intent of this
covenant is to assure that Pentegra shall have no unfunded liability whatsoever
at any time after the Closing Date with respect to any of Contributor's
employees or similar persons or entities, including, without limitation, any
Contributor Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of any Shareholder (other than in the ordinary course of business) or other
employee or an independent contractor of Contributor, adopt, amend or terminate
any compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect upon Contributor, its business, assets or
prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Contributor, nor will any repurchase of
any of Contributor's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Shareholders
shall use their best
<PAGE>
efforts to take, or cause to be taken, all actions necessary to effect the
acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Contributor and Shareholders will not
change in any material respect the tax or financial accounting methods or
practices followed by Contributor (including any material change in any
assumption underlying, or any method of calculating, any bad debt, contingency
or other reserve), except as may be required by law or generally accepted
accounting principles. Contributor and Shareholders will duly, accurately and
timely (without regard to any extensions of time) file all returns, information
statements and other documents relating to taxes of Contributor required to be
filed by it, and pay all taxes required to be paid by it, on or before the
Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Contributor hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Contributor and Shareholders covenant and agree that all of the
creditors with respect to the Business and the Assets will be paid in full by
Contributor prior to the Closing Date, except to extent that any liability to
such creditors is assumed by Pentegra pursuant to this Agreement. If required
by Pentegra, Contributor and Shareholders shall furnish Pentegra with proof of
payment of all creditors with respect to the Business and the Assets.
Notwithstanding the foregoing, Contributor and Shareholders may dispute the
validity or amount of any such creditor's claim without being deemed to be in
violation of this SECTION 4.11, provided that such dispute is in good faith and
does not unreasonably delay the resolution of the claim and provided, further
that Contributor and Shareholders agree to indemnify and bond Pentegra for such
amounts as is satisfactory to Pentegra.
4.12 LEASE. If Contributor leases any of its premises from any Shareholder
or other affiliate of Contributor or any shareholder of Contributor, Pentegra
shall have entered into a building lease (the "Building Lease") with the owner
of such premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, (i) a five year initial
term plus three five-year renewal options, (ii) a lease rate equal to the fair
market value lease rate, as agreed to by Pentegra, and (iii) such other
provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Contributor and Shareholders shall cooperate
with all requests made by Pentegra for the purpose of allowing Pentegra to hire
those non-dental employees of Contributor designated by Pentegra, such
employment to be effective as of the Closing Date. Notwithstanding the above,
Contributor and Shareholders shall remain liable under any Contributor Plans for
any claims incurred by any employees or their spouses or dependents, and for all
compensation, bonuses, benefits and other such items and other liabilities
related to Contributor's employees incurred by Contributor prior to the Closing
Date.
4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges that all
employees of Contributor hired by Pentegra pursuant to SECTION 4.13 above,
shall be treated as "leased employees" (as defined in Code Section 414(n)) of
Contributor and shall be treated as Clinic employees for purposes of eligibility
and participation in Contributor Plans.
4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective as
of the Closing Date.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
<PAGE>
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS.
Pentegra, Shareholders and Contributor agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, at its sole cost and expense,
shall cooperate to promptly prepare and file with the Securities and Exchange
Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate
Form) to be filed by Pentegra in connection with its Initial Public Offering
(including the prospectus constituting a part thereof, the "Registration
Statement"). Pentegra, at its sole cost and expense, shall obtain all necessary
state securities laws or "Blue Sky" permits and approvals required to carry out
the transactions contemplated by this Agreement and the Contributor and
Shareholders shall furnish all information concerning Contributor and
Shareholders as may be reasonable requested in connection with any such action.
Contributor and Shareholder represent and warrant that none of the
information or documents supplied or to be supplied by it specifically for
inclusion in the Registration Statement, by exhibit or otherwise, will, at the
time the Registration Statement and each amendment or supplement thereto, if
any, becomes effective under the Securities Act of 1933, 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, in light of the
circumstances under which they were made, not misleading. Contributor and
Shareholders shall be entitled to review the Registration Statement and each
amendment thereto, if any, prior to the time each becomes effective under the
Securities Act of 1933.
Contributor and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by Pentegra
in connection with the preparation of the Registration Statement and each
amendment or supplement thereto, or any other statement, filing, notice or
application made by or on behalf of each such party or any of its subsidiaries
to any governmental entity in connection with the transactions contemplated by
the Other Agreements or this Agreement.
6.2 SALES TAX. Notwithstanding any provision herein to the contrary,
Pentegra hereby covenants and agrees to pay any and all sales and/or use taxes
due and owing as a result of the transactions contemplated by this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at or
prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Contributor and Shareholders contained herein shall have been true and correct
in all respects when initially made and shall be true and correct in all
respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Contributor and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by
<PAGE>
Contributor and Shareholders prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Contributor shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Contributor, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and Pentegra shall
have executed and delivered a Service Agreement (the "Service Agreement"), in
substantially the form attached hereto as EXHIBIT 7.7, pursuant to which
Pentegra will provide management services to the Contributor. Each Shareholder
shall have executed and delivered a Guaranty Agreement in substantially the form
attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder
shall, among other things, guaranty the obligations of Contributor under the
Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated, and
caused each shareholder of Contributor that has an existing employment agreement
with Contributor to have terminated his or her employment agreement with
Contributor and shall have executed an employment agreement ("Employment
Agreement") with Contributor in form and substance attached hereto as EXHIBIT
7.8 and otherwise satisfactory to Contributor and Pentegra.
7.9 CONSENTS AND APPROVALS. Contributor and Shareholders shall have
obtained all necessary government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly
executed in form satisfactory to Pentegra and its counsel, referred to in
SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or
payables between Contributor and its shareholders or affiliates and Contributor
shall not have any liabilities, including indebtedness, guaranties and capital
leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Contributor and Shareholders shall have named Pentegra as
an additional insured on their liability insurance program in accordance with
SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Contributor since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. The Registration Statement shall have become
effective under the Securities Act (the "Effective Date") 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. At or prior to the date that the Registration Statement
is declared effective by the SEC, Pentegra
<PAGE>
shall have received all state securities and "Blue Sky" permits necessary to
consummate the transactions contemplated hereby. The Pentegra Common Stock
shall have been approved for listing on Nasdaq or other exchange selected by
Pentegra, subject only to official notification of issuance.
SECTION 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Contributor and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Pentegra contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Contributor shall have received all documents,
duly executed in form satisfactory to Contributor and its counsel, referred to
in SECTION 9.2.
8.5 SECURITIES APPROVAL. 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.
At or prior to the date that the Registration Statement is declared effective by
the SEC, Pentegra shall have received all state securities and "Blue Sky"
permits necessary to consummate the transactions contemplated hereby. The
Pentegra Common Stock shall have been approved for listing on Nasdaq or other
exchange selected by Pentegra, subject only to official notification of
issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. Within five business days
after requested by Pentegra, Contributor and Shareholders shall deliver to
Pentegra the following, all of which shall be in a form reasonably satisfactory
to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel
for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or
letter agreement in form and substance mutually acceptable to the parties
hereto:
(a) an executed original Service Agreement and executed originals of
all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of
Contributor authorizing the execution, delivery and performance of this
Agreement, the Service Agreement, the Employment Agreements and all related
documents and agreements each certified by the Secretary as being true and
correct copies of the original thereof;
<PAGE>
(d) a bill of sale conveying the Assets to Pentegra;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(f) certificates of the Shareholders and a duly authorized officer of
Contributor dated as of the Closing Date, (i) as to the truth and correctness of
the representations and warranties of Contributor and Shareholder contained
herein; (ii) as to the performance of and compliance by Contributor and
Shareholder with all covenants contained herein; and (iii) certifying that all
conditions precedent of Contributor and Shareholders to the Closing have been
satisfied;
(g) a certificate of the Secretary of Contributor certifying as to
the incumbency of the directors and officers of Contributor and as to the
signatures of such directors and officers who have executed documents delivered
at the Closing on behalf of Contributor;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Contributor and any state of required
foreign qualification of Contributor establishing that Contributor is in
existence and is in good standing to transact business in its state of
incorporation;
(i) an opinion of counsel to Contributor and Shareholder opining as
to the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Contributor, the enforceability of this Agreement and the other agreements and
documents to be executed in connection herewith, and other matters reasonably
requested by Pentegra;
(j) non-foreign affidavits executed by Contributor;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Contributor, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall
deliver to Contributor and Shareholder, the following, all of which shall be in
a form reasonably satisfactory to counsel to Contributor and Shareholders and
shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow
pending Closing, pursuant to an escrow agreement or letter agreement in form and
substance mutually acceptable to the parties hereto:
(a) the Acquisition Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance of
this Agreement and all related documents and
<PAGE>
agreements each certified by the Secretary as being true and correct copies
of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii) certifying
that all conditions precedent of Pentegra to the Closing have been satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and the
State of incorporation of Contributor;
(h) an opinion of counsel to Pentegra opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Pentegra, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Contributor;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Contributor to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in
any Exhibit attached hereto, any agreement executed pursuant hereto, and any
certificate executed and delivered by any party pursuant to the terms of this
Agreement, shall constitute representations and warranties of Contributor and
Shareholders, jointly and severally, or of Pentegra, as the case may be. All
such representations and warranties, and all representations and warranties
expressly labeled as such in this Agreement shall survive the date of this
Agreement and the Closing Date for a period of three (3) years following the
Closing Date, except that (i) the representations and warranties with respect to
environmental and medical waste laws and health care laws and matters shall
survive for a period of fifteen (15) years and tax representations shall survive
until one year after the expiration of the applicable statute of limitations.
Each party covenants with the other parties not to make any claim with respect
to such representations and warranties, against any party after the date on
which such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless
such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4
hereof, as the case may be. Each party hereby releases, acquits and discharges
the other party from any and all claims and demands, actions and causes of
action, damages, costs, expenses and rights of setoff with respect to which the
notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely
provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD CONTRIBUTOR AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING CONTRIBUTOR AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"),
HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES,
<PAGE>
ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED
TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM
OR BY REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY
PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF,
OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. CONTRIBUTOR AND
SHAREHOLDERS (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD
PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND
EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS
SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED
PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS,
DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT
LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING
FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER, AND
(B) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS PRIOR TO THE
CLOSING DATE,
(C) ANY VIOLATION BY CONTRIBUTOR OR ITS SHAREHOLDERS OR THEIR CONSULTANTS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES (OTHER
<PAGE>
THAN PENTEGRA) OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE,
OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF
THE CONTRIBUTOR OR SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD
PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(D) TAXES (OTHER THAN SALES AND USE TAXES) OF CONTRIBUTOR OR ANY
SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE
CONTRIBUTOR OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT,
(E) ANY LIABILITY OF CONTRIBUTOR OR THE SHAREHOLDERS FOR COSTS AND
EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION
WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(F) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(G) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
(H) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS AND
PROVIDED TO PENTEGRA OR ITS COUNSEL IN WRITING BY THE CONTRIBUTOR OR ITS
SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE
REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
CONTRIBUTOR OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO
MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the defense
of such action or proceeding, such Indemnified Person shall notify Indemnitor
thereof. If any such action or other proceeding shall be brought against any
Indemnified Person, Indemnitor shall, upon written notice given within a
reasonable time following receipt by Indemnitor of such notice from Indemnified
Person, be entitled to assume the defense of such action or proceeding with
counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person;
provided, however, that any Indemnified Person may at its own expense retain
separate counsel to participate in such defense. Notwithstanding the foregoing,
Indemnified Person shall have the right to employ separate counsel at
Indemnitor's expense and to control its own defense of such action or proceeding
if, in the reasonable opinion of counsel to such Indemnified Person, (a) there
are or may be legal defenses available to such Indemnified Person or to other
Indemnified Persons that are different from
<PAGE>
or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.
Except with respect to the failure of Pentegra to satisfy the payment of the
Acquisition Consideration, the parties hereto hereby acknowledge and agree
that the indemnification rights of the parties under this Section 10 and
equitable remedies, including without limitation, injunctive relief,
represent the sole and exclusive remedies that the parties hereto have with
respect to the breach of any representation, warranty or covenant set forth
in this Agreement.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Contributor or any Shareholder giving
rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra
shall be entitled to offset the amount of damages incurred by it as a result of
such breach of warranty, representation, covenant or agreement against any
amounts payable by Pentegra, including the amounts payable under the Service
Agreement. In the event of any breach of warranty, representation, covenant or
agreement by Pentegra giving rise to indemnification
under Section 10.2 or 10.4 hereof, Contributor shall be entitled to offset the
amount of damages actually incurred by it as a result of such breach of a
warranty, representation or covenant or agreement against any amounts payable by
Contributor or the Practice, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of
Contributor or Shareholder contained in this Agreement or in any certificate or
other document executed and delivered by Contributor or any Shareholder pursuant
to this Agreement is or becomes untrue or breached in any material respect or if
Contributor or any Shareholder fails to comply in any material respect with any
covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
(c) at any time by Contributor or any Shareholder if any representation or
warranty of Pentegra contained in this Agreement or in any certificate or other
document executed and delivered by Pentegra pursuant to this Agreement is or
becomes untrue or breached in any material respect or if Pentegra fails to
comply in any material respect with any covenant or agreement contained herein
and such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra, Shareholders or Contributor if the transaction
contemplated hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Contributor, that such termination is
desirable and in the best interests of Pentegra.
<PAGE>
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date,
Contributor shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of
Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer shall
be treated as effective for any purpose or (b) engage in any transaction,
whether or not with respect to any shares of Pentegra Common Stock or any
interest therein, the intent or effect of which is to reduce the risk of owning
shares of Pentegra Common Stock. The certificates evidencing the Pentegra
Common Stock delivered to Contributor pursuant to the terms hereof will bear a
legend substantially in the form set forth below and containing such other
information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Shareholders
acknowledge that the shares of Pentegra Common Stock to be delivered to
Contributor pursuant to this Agreement have not been and will not be registered
under the Securities Act of 1933 and may not be resold without compliance with
the Securities Act of 1933, as amended or an exemption thereunder. The Pentegra
Common Stock to be acquired by Contributor pursuant to this Agreement is being
acquired solely for its own account, for investment purposes only and with no
present intention of distributing, selling or otherwise disposing of it in
connection with a distribution. Contributor covenants, warrants and represents
that none of the shares of Pentegra Common Stock issued to it will be offered,
sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
except after full compliance with all of the applicable provisions of the
Securities Act, as amended, and the rules and regulations of the Securities
Exchange Commission and applicable state securities laws and regulations. All
certificates evidencing shares of Pentegra Common Stock shall bear the following
legend in addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Contributor resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Shareholders are able
to bear the economic risk of an investment in Pentegra Common Stock acquired
pursuant to this Agreement and can afford to sustain a total loss of such
investment and have such knowledge and experience in financial and business
matters that they are capable of evaluating the merits and risks of the proposed
investment and therefore have the capacity to protect their own interests in
connection with the acquisition of the Pentegra Common Stock. Contributor,
Shareholders and their representatives have had an adequate opportunity to ask
questions and receive answers from the officers of Pentegra concerning any and
all matters relating to the background and experience of the officers and
directors of Pentegra, the plans for the operations of the business of Pentegra,
and any plans for additional acquisitions and the like. Contributor,
Shareholders and their representatives have asked any and all questions in the
nature described in the preceding sentence and all
<PAGE>
questions have been answered to their satisfaction. Contributor and
Shareholders are "accredited investors" as defined in Regulation D of the
Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Contributor and Shareholders agree that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally through
no fault of Contributor or Shareholders, (ii) disclosure is required by law or
the order of any governmental authority under color of law, provided, that prior
to disclosing any information pursuant to this clause (ii), Contributor and
Shareholders shall, if possible, give prior written notice thereof to the other
parties hereto, and provide such other parties hereto, at their sole cost and
expense, with the opportunity to contest such disclosure, (iii) Contributor and
Shareholders reasonably believe that such disclosure is required in connection
with the defense of a lawsuit against the disclosing party, or (iv) Contributor
and Shareholders are the sole and exclusive owner of such confidential
information as a result of the transactions contemplated hereunder or otherwise.
In the event of a breach or threatened breach by Contributor or Shareholders of
the provisions of this SECTION 13, Pentegra shall be entitled to an injunction
restraining Contributor and Shareholders from disclosing, in whole or in part,
such confidential information. Nothing herein shall be construed as prohibiting
Pentegra from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages. The obligations of the parties under
this SECTION 13 shall survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement, together with the transactions contemplated by the Other
Agreement and the Initial Public Offering, will qualify as an exchange meeting
the requirements of Section 351 of the Code. The tax returns (and schedules
thereto) of Shareholders, Contributor and Pentegra shall be filed in a manner
consistent with such intention and Contributor and Pentegra shall each provide
the other with such tax information, reports, returns or schedules as may be
reasonably required to assist the other in so reporting the transactions
contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery, or by
facsimile AND overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
<PAGE>
Facsimile: (214) 953-5822
If to Contributor or Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.13, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this Agreement,
whether or not such transactions are consummated. Without limiting the
generality of the foregoing and whether or not such liabilities may be deemed to
have been incurred in the ordinary course of business, Pentegra shall not be
liable to or required to pay, either directly or indirectly, any fees and
expenses of legal counsel, accountants, auditors or other persons or entities
retained by Contributor or any Shareholder for services rendered in connection
with negotiating and closing the transactions contemplated by this Agreement or
the documents to be executed in connection herewith, whether or not such costs
or expenses are incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure, either
written or oral, regarding the transactions contemplated by this Agreement
without the prior written consent of the other party, provided that the
foregoing shall not prohibit any disclosure (a) by press release, filing or
otherwise that Pentegra has determined in good faith judgment to be required by
Federal securities laws or the rules of the National Association of Securities
Dealers, (b) to attorneys, accountants, investment bankers or other agents of
the parties assisting the parties in connection with the transactions
contemplated by this Agreement, and (c) by Pentegra in connection with the
conduct of its Initial Public Offering and conducting an examination of the
operations and assets of Contributor.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF
CONTRIBUTOR AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS
PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are
integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and not
only in connection with the specific representation in which they are explicitly
referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
<PAGE>
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one and the same
instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any entity
that, through one or more intermediaries is, controlled, controlled by or under
common control with, Pentegra. Upon any such assignment prior to the Closing,
all references herein to Pentegra (including those to Pentegra Common Stock)
shall be deemed to include references to the assignee and the assignee's common
stock. Notwithstanding any such assignment, Pentegra shall not, absent a
written release from Contributor, be relieved from its obligations to
Contributor under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Contributor, on the other hand, file suit in any court against any
other party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at Closing
a pro rata portion of all taxes (other than sales and use taxes) levied upon
the Assets for the calendar year in which the Closing occurs. Such taxes shall
be estimated, apportioned and pro-rated among Contributor and Pentegra as of the
Closing Date, and the prorated amount due Pentegra shall be credited to the cash
portion of the Purchase Consideration. Upon payment by Pentegra of such taxes
actually assessed and paid on the Assets, Pentegra shall calculate the
apportionment of such taxes and shall pay Contributor or may demand from
Contributor, and Contributor agrees to pay, the amount necessary to correct the
estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing, and
signed by the parties hereto. The waiver of any of the terms and conditions of
this Agreement shall not be construed as a waiver of any other terms and
conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Contributors or Shareholders (hereinafter referred to as a "Party"), whether
made before or after the institution of any legal proceeding, any dispute among
the parties hereto in any way arising out of, related to, or in connection with
this Agreement (hereinafter a "Dispute"), shall be resolved by binding
arbitration in accordance with the terms of this Section (hereinafter the
"Arbitration Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in accordance
with the terms of this Arbitration Program, the Commercial Arbitration Rules of
the AAA. In the event of any inconsistency between this Arbitration Program and
those rules
<PAGE>
or statutes, then the terms of this Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been completed
and the arbitrators have determined each party's post-arbitration obligations
and responsibilities as it relates to such warranties and covenants. No
provision of, nor the exercise of any rights under, this Arbitration Program
shall limit the right of any Party at any time to seek or use ancillary or
preliminary judicial or non-judicial self help remedies for the purposes of
obtaining, perfecting, preserving, or foreclosing upon any personal property in
which there has been granted a security interest or lien by a Party in the
Documents. In Disputes involving indebtedness or other monetary obligations,
each Party agrees that the other Party may proceed against all liable persons,
jointly and severally against one or more of them, without impairing rights
against other liable persons. Nor shall a Party be required to join the
principal obligor or any other liable persons (e.g., sureties or guarantors) in
any proceeding against a particular person. A Party may release or settle with
one or more liable persons as the Party deems fit without releasing or impairing
rights to proceed against any persons not so released. All statutes of
limitation that would otherwise be applicable shall apply to any arbitration
proceeding.
The party seeking arbitration shall notify the other Party, in writing, of
that Party's desire to arbitrate a dispute; and each Party shall, within twenty
(20) days from the date such notification is received, select an arbitrator, and
those two arbitrators shall select a third arbitrator within ten (10) days
thereafter. The issues or claims in dispute shall be committed to writing,
separately stated and numbered, and each party's proposed answers or contentions
shall be signed below the questions. Failure by a party to select an arbitrator
within the prescribed time period shall serve as that Party's acquiescence and
acceptance of the other party's selection of arbitrator. The arbitrators shall
resolve all Disputes in accordance with the applicable substantive law. Any
Dispute shall be decided by a majority vote of three arbitrators, unless the
claim or amount in controversy does not exceed $100,000.00, in which case a
single arbitrator (who shall have authority to render a maximum award of
$100,000.00, including all damages of any kind, costs and fees) may decide the
Dispute. The arbitrators may grant any remedy or relief that the arbitrators
deem just and equitable and within the scope of this Arbitration Program. The
arbitrators may also grant such ancillary relief as is necessary to make
effective the award. In all arbitration proceedings the arbitrators shall make
specific and written findings of fact and conclusions of law. In all
arbitration proceedings in which the amount in controversy exceeds $100,000.00,
in the aggregate, the Parties shall have in addition to the statutory right to
seek vacation or modification of any award pursuant to applicable law, the right
to seek vacation or modification of any award that is based in whole, or in
part, on an incorrect or erroneous ruling of law by appeal to an appropriate
court having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must be
filed in a court having jurisdiction over the Dispute within 15 days from the
date the award in rendered. The arbitrators' findings of fact shall be binding
on all Parties and shall not be subject to further review except as otherwise
allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in writing
by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the
headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this
Arbitration Program shall survive any termination, amendment, or expiration of
the Documents, unless the Parties otherwise expressly agree in writing making
specific reference to this Arbitration Program. To the extent permitted by
applicable law, the arbitrator shall have the power to award recovery of all
costs and fees (including attorney's fees, administrative fees, and arbitrators'
fees) to the prevailing Party. This Arbitration Program may be amended,
changed, or modified only by a writing which specifically refers to this
Arbitration Program and which is signed by all the Parties. If any term,
covenant, condition or provision of the Arbitration Program is found to be
unlawful or invalid or unenforceable, such illegality or invalidity or
unenforceable shall not affect the legality, validity or enforceability of the
remaining parts of this Arbitration Program, and all such remaining parts hereof
shall be valid and enforceable and have full force and effect as if the illegal,
invalid or unenforceable part had not been included. Each Party agrees to keep
all Disputes and arbitration proceedings strictly confidential, except for
disclosures of information required in the ordinary course of business of the
Parties or by applicable law or regulation.
<PAGE>
14.16 SEVERABILITY. If any provision of this Agreement shall be found
to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect. In lieu of such
provision, there shall be added automatically as part of this Agreement, a
provision as similar in its terms to such provision as may be possible and be
legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
RICHARD W. MAINS, D.M.D.., P.C.
By: /s/ Richard W. Mains
-----------------------------------
Its: President
-----------------------------------
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
-----------------------------------
Its: Senior VP
-----------------------------------
/s/ Richard W. Mains
---------------------------------------
Richard W. Mains, D.M.D., P.C.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment
Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
and
JAMES M MCDONOUGH, D.D.S.
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . 3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . 3
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . 3
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . 6
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . 7
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . 7
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . 8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . 8
3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4. COVENANTS OF DENTIST.
4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . 9
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . 9
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . .10
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . .10
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . .10
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . .10
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . .10
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . . . . .10
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . .11
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . .11
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . .11
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . .11
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . .11
Section 6. COVENANTS OF PENTEGRA AND DENTIST
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . .12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . .12
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . .12
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . .12
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . .12
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . .12
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . .13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . .13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . .13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . .13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . .13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . .13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . .13
Section 8. DENTIST'S CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . .13
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . .13
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . .13
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . .14
Section 9. CLOSING DELIVERIES
<PAGE>
9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . . . . .14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . .15
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . .15
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . .16
10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . . . . .16
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . .17
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . .18
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . .19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . .19
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . .20
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . .20
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . .20
14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . .21
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . .21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . .21
14.12 NO RULE OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . .21
14.13 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . .21
14.14 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
14.15 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . .21
14.16 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as
of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware
corporation ("Pentegra") and JAMES M. MCDONOUGH, D.D.S. ("Dentist").
WITNESSETH:
WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires
to receive from Dentist, certain assets of Dentist;
WHEREAS, Pentegra or its affiliated designee has entered into or intends to
enter into Agreements and Plans of Reorganization, Asset Contribution Agreements
and other acquisition agreements (collectively, the "Other Agreements") with
such persons or entities or the stockholders of such entities listed on EXHIBIT
A (together with Dentist, the "Target Companies");
WHEREAS, it is intended for Federal income tax purposes that the transfers
contemplated by this Agreement, the Other Agreements and Pentegra's initial
public offering ("Initial Public Offering") of shares of its common stock, par
value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange
within the meaning of Section 351 of the Internal Revenue Code of 1986, as
amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock
is consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions
contained herein, on the Closing Date, Dentist shall convey, transfer, deliver
and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all
of Dentist's right, title and interest in and to those certain assets described
on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively
"Assets"), free and clear of all obligations, security interests, claims, liens
and encumbrances, except as specifically assumed, or taken subject to, by
Pentegra pursuant to SECTION 1.3(b) hereof.
<PAGE>
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and contributed hereunder, and Dentist shall retain all of its
right, title and interest in and to, the assets not specifically transferred
hereunder, including without limitation, the assets described on EXHIBIT 1.2
(the "Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Dentist contained
herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Dentist the consideration specified in
ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b)
attached hereto to the extent that such obligations, commitments, liabilities
and indebtedness are current and not otherwise in default. (the "Assumed
Liabilities"). Notwithstanding any contrary provision contained herein,
Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i)
any liability, commitment or obligation or trade payable or indebtedness not
specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on
EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default
under such contracts, leases, commitments or obligations which occurred on or
before the Closing Date; (iii) any liability for any employee benefits
payable to employees of Dentist, including, but not limited to, liabilities
arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any
liability based upon or arising out of a violation of any antitrust or
similar restraint-of-trade laws by Dentist, including, without limiting the
generality of the foregoing, any such antitrust liability which may arise in
connection with agreements, contracts, commitments or orders for the sale of
goods or provision of services by Dentist reflected on the books of Dentist
at or prior to the Closing Date; (v) any liability based upon or arising out
of any tortious or wrongful actions of Dentist, any licensed professional
employee or independent contractor of Dentist, (vi) any liability for the
payment of any taxes of Dentist, including without limitation, sales, use and
other transfer taxes and income taxes arising from or by reason of the
transactions contemplated by this Agreement; (vii) any indebtedness secured
by deeds of trust or mortgages on real property; nor (viii) any liability
incurred or to be incurred pursuant to any malpractice or other suits or
actions pending against Dentist.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
or the Dentist shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise (i) in Pentegra
its right, title or interest in, to or under any of the Assets, (ii) in Dentist
its right, title or interest to the Consideration, or otherwise to carry out
this Agreement, in return for the consideration set forth in this Agreement, the
Dentist shall execute and deliver all such deeds, bills of sale, assignments and
assurances and take and do all such other actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right, title and interest
in, to and under the Assets in Pentegra or otherwise to carry out this
Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
Dentist hereby represents and warrants to Pentegra as follows:
2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the
State of Massachusetts. Dentist does not have any assets, employees or offices
in any state other than the state set forth in the first sentence of this
SECTION 2.1.
2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and
perform this
<PAGE>
Agreement and the other agreements to be executed and delivered in connection
herewith. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing
Date, duly executed and delivered by Dentist and constitute or will
constitute the legal, valid and binding obligations of Dentist in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of
this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and,
subject to the receipt of consents described on EXHIBIT 2.4, the consummation
of the actions contemplated hereby will not, result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Dentist is a party or
by which Dentist is bound, or violate any material restrictions of any kind
to which Dentist is subject, or result in any lien or encumbrance on any of
Dentist's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets, or
waivers thereof, have been duly obtained and are in full force and effect and
are described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Dentist, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses or
permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Dentist.
2.5 [INTENTIONALLY DELETED].
2.6 [INTENTIONALLY DELETED].
2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any related
unaudited statements of income, retained earnings, schedule of accounts
receivable, accounts payable and accrued liabilities, and cash flows for the
twelve months then ended (collectively, with the related notes thereto, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and results of operations of Dentist as of the dates and for the
periods indicated and reflect all fixed and contingent liabilities of Dentist.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Dentist leases, as lessor or lessee, real or personal property
used in operating the Business, related to the Assets or otherwise. All such
leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their
respective terms, and there is not under any such lease any existing default by
Dentist, as lessor or lessee, or any condition or event of which Dentist has
knowledge which with notice or lapse of time, or both, would constitute a
default, in respect of which Dentist has not taken adequate steps to cure such
default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Dentist has no knowledge of any
latent defects therein.
<PAGE>
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances set
forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to the Closing Date and evidence of
such releases of liens and claims shall be provided to Pentegra on the Closing
Date and the Assets shall not be used to satisfy such liens, claims or
encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned or
used by Dentist, are in good, current, standard and merchantable condition and
are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Dentist has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Dentist, including the names of any entities from whom Dentist previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Dentist in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Dentist has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on
EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this
Agreement of: (a) the most recent payroll report of Dentist, showing all current
employees of Dentist and their current levels of compensation, (b) promised
increases in compensation of employees of Dentist that have not yet been
effected, (c) oral or written employment agreements, consulting agreements or
independent contractor agreements (and all amendments thereto) to which Dentist
is a party, copies of which have been delivered to Pentegra, and (d) all
employee manuals, materials, policies, procedures and work-related rules, copies
of which have been delivered to Pentegra. Dentist is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Dentist has not engaged in any unfair labor practice.
There are no unfair labor practices charges or complaints pending or threatened
against Dentist, and Dentist has never been a party to any agreement with any
union, labor organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the
Assets is subject to any pending, nor does Dentist have knowledge of any
threatened, litigation, governmental investigation, condemnation or other
proceeding against or relating to or affecting Dentist, the Business, the Assets
or the transactions contemplated by this Agreement, and, to the knowledge of
Dentist, no basis for any such action exists, nor is there any legal impediment
of which Dentist has knowledge to the continued operation of its business or the
use of the Assets in the ordinary course, subject to consents set forth on
EXHIBIT 2.4.
2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts, obligations
and commitments of Dentist ("Contracts"), entered into in connection with and
related to the Assets or the Business, all of which are listed or incorporated
by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case
of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than
leases) attached hereto. Except as otherwise indicated on such Exhibits, all of
such Contracts are valid, binding and enforceable in accordance with their terms
and are in full force
<PAGE>
and effect, and no defenses, offsets or counterclaims have been asserted or
may be made by any party thereto. Except as indicated on such Exhibits,
there is not under any such Contract any existing default by Dentist, or any
condition or event of which Dentist has knowledge which with notice or lapse
of time, or both, would constitute a default. Dentist has no knowledge of
any default by any other party to such Contracts. Dentist has not received
notice of the intention of any party to any Contract to cancel or terminate
any Contract and have no reason to believe that any amendment or change to
any Contract is contemplated by any party thereto. Other than those
contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13
and EXHIBIT 2.15, Dentist is not a party to any material written or oral
agreement contract, lease or arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product or
service;
(h) Loan agreement or other contract for money borrowed or lent or to
be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of the
Dentist, oral or written, that provide for prepayments or deferred installment
payments; or
(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Dentist on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) or entered into any contract, lease, license or
commitment, except in connection with the performance of this Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued, contingent
or otherwise) other than (i) liabilities shown or reflected on the Balance
Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary
course of business;
(c) Made any payments to or loaned any money to any person or entity
other than in the ordinary course of business;
<PAGE>
(d) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(e) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have been
required due to income or operations of Dentist since the Balance Sheet Date;
(f) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(g) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(h) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants or
agents, or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of any officer, employee, consultant or agent;
(i) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00);
(j) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(k) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties, assets
or business or the Business or the Assets, or experienced any other material
adverse change in its financial condition, assets, prospects, liabilities or
business; or
(l) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it. All such tax returns are complete and accurate in all respects and
properly reflect the relevant taxes for the periods covered thereby. Dentist
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Dentist. There are no audits relating to taxes of
Dentist pending or in process or, to the knowledge of Dentist, threatened.
Dentist is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency. There are no
liens or encumbrances relating to taxes on or threatened against any of the
assets of Dentist. Dentist has withheld and paid all taxes required by law to
have been withheld and paid by it. Neither Dentist nor any predecessor of
Dentist is or has been a party to any tax allocation or sharing agreement or a
member of an affiliated group of corporations filing a consolidated Federal
income tax return. Dentist has delivered to Pentegra correct and complete
copies of Dentist's three most recently filed annual state, local and Federal
income tax returns, together with all examination reports and statements of
deficiencies assessed against or agreed to by Dentist during the three calendar
year period preceding the date of this Agreement. Dentist has neither made any
payments, is obligated to make any payments, or is a party to any agreement that
under any circumstance could obligate it to make any payments that will not be
deductible under Code section 280G.
(b) Dentist does not intend to dispose of any of the shares of Pentegra
Common Stock to be received
<PAGE>
hereunder and is not a party to any plan, arrangement or agreement for the
disposition of such shares. Nothing contained herein shall prohibit Dentist
from selling such shares of Pentegra Common Stock after the designated
holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated
by this Agreement which may be now or hereafter asserted against Pentegra,
Dentist resulting from any action taken by Dentist or their respective agents
or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against
on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and
has not incurred since that date and will not have incurred as of the Closing
Date, any liabilities or obligations of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, other than those
incurred in the ordinary course of business or as set forth on EXHIBIT 2.16.
Dentist does not know, or have reasonable grounds to know, of any basis for the
assertion against Dentist as of the Balance Sheet Date, of any claim or
liability of any nature in any amount not fully reflected or reserved against on
the Balance Sheet, or of any claim or liability of any nature arising since that
date other than those incurred in the ordinary course of business or
contemplated by this Agreement. All indebtedness of Dentist (including without
limitation, indebtedness for borrowed money, guaranties and capital lease
obligations) is described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist
carries property, liability, malpractice, workers' compensation and such other
types of insurance as is customary in the industry. Valid and enforceable
policies in such amounts are outstanding and duly in force and will remain duly
in force through the Closing Date. All such policies are described in EXHIBIT
2.20 attached hereto and true and correct copies have been delivered to
Pentegra. Dentist has not received notice or other communication from the
issuer of any such insurance policy cancelling or amending such policy or
threatening to do so. Neither Dentist nor any licensed professional employee of
Dentist has any outstanding claims, settlements or premiums owed against any
insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached
hereto, Dentist has neither established, nor maintains, nor is obligated to make
contributions to or under or otherwise participate in, (a) any bonus or other
type of compensation or employment plan, program, agreement, policy, commitment,
contract or arrangement (whether or not set forth in a written document); (b)
any pension, profit-sharing, retirement or other plan, program or arrangement;
or (c) any other employee benefit plan, fund or program, including, but not
limited to, those described in SECTION 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT
2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been
operated and administered in all material respects in accordance with all
applicable laws, rules and regulations, including without limitation, ERISA, the
Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of
1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination
in Employment Act of 1967, as amended, and the related rules and regulations
adopted by those Federal agencies responsible for the administration of such
laws. No act or failure to act by Dentist has resulted in a "prohibited
transaction" (as defined in ERISA) with respect to the Dentist Plans. No
"reportable event" (as defined in ERISA) has occurred with respect to any of the
Dentist Plans. Dentist has not previously made, is not currently making, and is
not obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Dentist Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at least equal to the value
of plan liabilities or (ii) the value of plan liabilities in excess of plan
assets is disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing
Date, a party to any agreement or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ,
<PAGE>
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Dentist, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed
professional employees, and the conduct of the Business and use of the Assets,
have complied with all applicable laws, rules, regulations and licensing
requirements, including, without limitation, the Federal Environmental
Protection Act, the Occupational Safety and Health Act, the Americans with
Disabilities Act and any environmental laws and medical waste laws, and there
exist no violations by Dentist or any licensed professional employee of Dentist
of any Federal, state or local law or regulation. Dentist has not received any
notice of a violation of any Federal, state and local laws, regulations and
ordinances relating to the operations of the Business and Assets and no notice
of any pending inspection or violation of any such law, regulation or ordinance
has been received by Dentist.
2.24 THIRD PARTY PAYORS. Dentist and each licensed professional
employee or independent contractor of Dentist has timely filed all claims or
other reports required to be filed with respect to the purchase of services
by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are
no pending appeals, overpayment determinations, adjustments, challenges,
audit, litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Dentist and each
licensed professional employee of Dentist. Neither Dentist nor any licensed
professional employee of Dentist has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Dentist and Dentist's licensed professional employees has not (a) knowingly
and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist
in this Agreement, and no Exhibit or certificate issued or executed by, or
information furnished by Dentist or to be furnished by Dentist to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Dentist has with any bank or other
financial institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or
employee or family member of Dentist, or their respective spouses, children or
affiliates, owns directly or indirectly, on an individual or joint basis, any
interest in, has a compensation or other financial arrangement with, or serves
as an officer or director of, any customer or supplier or competitor of Dentist
or any organization that has a material contract or arrangement with Dentist.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of
the names and addresses of each payor of Dentist's services which accounted for
more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has
good relations with all such payors and other material payors of Dentist and
<PAGE>
none of such payors has notified Dentist that it intends to discontinue
its relationship with Dentist or to deny any claims submitted to such payor
for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Dentist as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions required
by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize
the execution, delivery and performance of this Agreement and such related
documents. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing Date,
duly executed and delivered by Pentegra and constitute or will constitute the
legal, valid and binding obligations of Pentegra, enforceable against Pentegra
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and delivery
of this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and, the
consummation of the actions contemplated hereby will not, violate any provision
of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or decree
to which Pentegra is a party or by which Pentegra is bound, or violate any
material restrictions of any kind to which Pentegra is subject, or result in any
lien or encumbrance on any of Pentegra's assets. Other than as have been
obtained or as would not have a material adverse effect, there are no consents
of any person or entity required for the transaction contemplated hereby on
behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would not
have a material adverse effect, there are no proceedings pending or, to the
knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses or
permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any pending,
nor does Pentegra have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Pentegra, its business, assets or the transactions contemplated by
this Agreement, and, to the knowledge of Pentegra, no basis for any such action
exists, nor is there any legal impediment of which Pentegra has knowledge to the
continued operation of its business or the use of its Assets in the ordinary
course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports and
other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it, other than as would not have a material adverse effect. Pentegra
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Pentegra. There are no audits relating to taxes of
Pentegra pending or in process or, to the knowledge of Pentegra, threatened.
Pentegra is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of
<PAGE>
any extension of time within which to file any tax return or to pay any tax
assessment or deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra
in this Agreement, and no Exhibit or certificate issued by officers or directors
of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements or facts contained therein not
misleading.
SECTION 4. COVENANTS OF DENTIST.
Dentist agrees that between the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and conditions. Dentist agrees to complete the
Exhibits hereto to be provided by him in form and substance satisfactory to
Pentegra.
4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the
Assets in the ordinary course. Dentist shall not enter into any lease,
contract, indebtedness, commitment, purchase or sale or acquire or dispose of
any capital asset relating to the Business or the Assets except in the ordinary
course of business. Dentist shall use their best efforts to preserve the
Business and Assets intact and shall not take any action that would have an
adverse effect on the Business or Assets. Dentist shall use their best efforts
to preserve intact the relationships with payors, customers, suppliers, patients
and others having significant business relations with Dentist. Dentist shall
collect its receivables and pay its trade payables in the ordinary course of
business. Dentist shall not introduce any new method of management, operations
or accounting.
4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized
representatives access to, and make available for inspection, all of the assets
and business of Dentist, the Business and the Assets, including employees,
customers and suppliers and permit Pentegra and its authorized representatives
to inspect and make copies of all documents, records and information with
respect to the business or assets of Dentist, the Business or the Assets as
Pentegra or its representatives may request. Dentist shall promptly notify
Pentegra in writing of (a) any notice or communication relating to a default or
event that, with notice or lapse of time or both, could become a default, under
any contract, commitment or obligation to which Dentist is a party or relating
to the Business or the Assets, and (b) any adverse change in Dentist's or the
Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall
use his best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby, including
consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain
<PAGE>
all licenses, permits, approvals or other authorizations required under any law,
rule, regulation, or otherwise to provide the services of the Practice
contemplated by the Service Agreement and to conduct the intended business of
the Practice and operate the Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of Closing or the termination of this Agreement in accordance with the
provisions hereof, Dentist shall not, and shall use its best efforts to cause
Dentist's employees, agents and representatives not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making or implementation
of any proposal or offer, including without limitation, any proposal or offer to
the Dentist, with respect to a merger, acquisition, consolidation or similar
transaction involving, or the purchase of all or any significant portion of the
assets or any equity securities of Dentist or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to such proposal or offer, and Dentist
will immediately cease any such activities, discussions or negotiations
heretofore conducted with respect to any of the foregoing. Dentist shall
immediately notify Pentegra if any such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund completely
for any accrued benefits, where applicable, or vested accrued benefits for which
Dentist or any entity might have any liability whatsoever arising from any
insurance, pension plan, employment tax or similar liability of Dentist to any
employee or other person or entity (including, without limitation, any Dentist
Plan and any liability under employment contracts with Dentist) allocable to
services performed prior to the Closing Date. Dentist acknowledges that the
purpose and intent of this covenant is to assure that Pentegra shall have no
liability whatsoever at any time after the Closing Date with respect to any of
Dentist's employees or similar persons or entities, including, without
limitation, any Dentist Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of the Dentist (other than in the ordinary course of business) or other employee
or an independent contractor of Dentist, adopt, amend or terminate any
compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect upon Dentist, its business, assets or
prospects.
4.8 [INTENTIONALLY OMITTED].
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best
efforts to take, or cause to be taken, all actions necessary to effect the
acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material
respect the tax or financial accounting methods or practices followed by Dentist
(including any material change in any assumption underlying, or any method of
calculating, any bad debt, contingency or other reserve), except as may be
required by law or generally accepted accounting principles. Dentist will
duly, accurately and timely (without regard to any extensions of time) file all
returns, information statements and other documents relating to taxes of Dentist
required to be filed by it, and pay all taxes required to be paid by it, on or
before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive
any compliance with the applicable state Bulk Transfers Act, if any. Dentist
covenants and agrees that all of the creditors with respect to the Business and
the Assets will be paid in full by Dentist prior to the Closing Date, except to
extent that any liability to such creditors is assumed by Pentegra pursuant to
this Agreement. If required by
<PAGE>
Pentegra, Dentist shall furnish Pentegra with proof of payment of all
creditors with respect to the Business and the Assets. Notwithstanding the
foregoing, Dentist may dispute the validity or amount of any such creditor's
claim without being deemed to be in violation of this SECTION 4.11, provided
that such dispute is in good faith and does not unreasonably delay the
resolution of the claim and provided, further that Dentist agrees to
indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Dentist leases any of its premises from the Dentist or
other affiliate of Dentist, Pentegra shall have entered into a building lease
(the "Building Lease") with the owner of such premises on terms and conditions
satisfactory to Pentegra, the terms and conditions of which shall include,
without limitation, (i) a five year initial term plus three five-year renewal
options, (ii) a lease rate equal to the fair market value lease rate, as agreed
to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made
by Pentegra for the purpose of allowing Pentegra to hire those non-dental
employees of Dentist designated by Pentegra, such employment to be effective as
of the Closing Date. Notwithstanding the above, Dentist shall remain liable
under any Dentist Plans for any claims incurred by any employees or their
spouses or dependents, and for all compensation, bonuses, benefits and other
such items and other liabilities related to Dentist's employees incurred by
Dentist prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all
employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be
treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and
shall be treated as Clinic employees for purposes of eligibility and
participation in Dentist Plans.
4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective as
of the Closing Date.
4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited
liability company, partnership or other legal entity (the "Practice") approved
by Pentegra for the purpose of practicing dentistry and entering into the
Service Agreement. The Practice shall be duly organized, in existing and in
good standing under the laws of the State in which the Dentist and the Practice
are to practice dentistry. The Practice shall have all necessary power to own
all of its assets and to carry on its business as such business is now being
conducted. The Dentist shall be the sole member/shareholder/partner of the
Practice and own all such interests free of all security interests, claims,
encumbrances and liens. Each interest in the Practice shall be legally and
validly issued and fully paid and nonassessable. There shall be no outstanding
(a) bonds, debentures, notes or other obligations the holders of which have the
right to vote with the members/partners/shareholders of the Practice on any
matter, (b) securities of the Practice convertible into equity interests in the
Practice, or (c) commitments, options, rights or warrants to issue any such
equity interests in the Practice, to issue securities of the Practice
convertible into such equity interests, or to redeem any securities of the
Practice. No interests of the Practice shall have been issued or disposed of in
violation of the preemptive rights, rights of first refusal or similar rights of
any of the Practice's members/partners/shareholders. The Practice shall quality
to do business as a foreign entity in any other state or jurisdiction by reason
of its business, properties or activities in or relating to such other state or
jurisdiction.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation,
Bylaws/Regulations and minutes of the Practice and all amendments thereto of
the Practice shall have been delivered to Pentegra and shall be in form and
substance satisfactory to Pentegra. The minute books of the Practice shall
contain all accurate minutes of the meetings of and consents to actions taken
without meetings of the members\managers/partners/board of directors of the
Practice since its formation. The books of account of the Practice shall
have been kept accurately in the ordinary course of business and the
revenues, expenses, assets and liabilities of the Practice shall have been
properly recorded in such books.
<PAGE>
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have
the power to execute, deliver and perform its obligations under all
agreements and other documents to be executed and delivered by it pursuant to
this Agreement, including without limitation, the Service Agreement and each
Employment Agreement or to be executed and delivered on the Closing Date, and
has taken all action required by law, its Organization/Partnership
Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to
authorize the execution, delivery and performance of such documents. The
Service Agreement, the Employment Agreement and the other agreements
contemplated hereby shall have been duly executed and delivered by the
Practice and constitute or will constitute the legal, valid and binding
obligations of the Practice enforceable against the Practice in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of the
Service Agreement, the Employment Agreements and the other agreements
contemplated hereby will not violate any provision of the organizational
documents of the Practice or any provisions of, or result in the acceleration
of, any obligation under any mortgage, lien, lease, agreement, rent,
instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any
material restrictions of any kind to which the Practice is subject, or result
in any lien or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of
Organization/Partnership Agreement/Articles of Incorporation,
Bylaws/Regulations and as of the Closing Date, the Service Agreement and the
Employment Agreements, the Practice shall not be a party to or subject to any
agreement, indenture or other instrument.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use
its best efforts to cause the consummation of the transactions contemplated
hereby in accordance with their terms and provisions. Pentegra agrees to
complete the Exhibits hereto to be provided by it; and agrees to assist the
Dentist with the preparation of his exhibits in form and substance
satisfactory to Pentegra and the Dentist.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS.
Pentegra shall use its best efforts to secure all necessary approvals and
consents of third parties to the consummation of the transactions
contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND DENTIST.
Pentegra and Dentist agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra shall promptly prepare
and file with the Securities Exchange Commission ("SEC") the Registration
Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in
connection with its Initial Public Offering (including the prospectus
constituting a part thereof, the "Registration Statement"). Pentegra shall
obtain all necessary state securities laws or "Blue Sky" permits and
approvals required to carry out the transactions contemplated by this
Agreement and the Dentist shall furnish all information concerning Dentist as
may be reasonable requested in connection with any such action.
Dentist represents and warrants that none of the information or documents
supplied or to be supplied by it specifically for inclusion in the Registration
Statement, by exhibit or otherwise, will, at the time the
<PAGE>
Registration Statement and each amendment or supplement thereto, if any,
becomes effective under the Securities Act of 1933, 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, in light of
the circumstances under which they were made, not misleading. Dentist shall
be entitled to review the Registration Statement and each amendment thereto,
if any, prior to the time each becomes effective under the Securities Act of
1933.
Dentist shall furnish Pentegra will all information concerning itself and
such other matters as may be reasonable requested by Pentegra in connection with
the preparation of the Registration Statement and each amendment or supplement
thereto, or any other statement, filing, notice or application made by or on
behalf of each such party or any of its subsidiaries to any governmental entity
in connection with the transactions contemplated by the Other Agreements or this
Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at or
prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Dentist contained herein shall have been true and correct in
all respects when initially made and shall be true and correct in all
respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Dentist prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court
or governmental body shall have been threatened orally or in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of
the transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Dentist shall have occurred since the Balance Sheet
Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Dentist, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; DENTIST AGREEMENT. The Practice and
Pentegra shall have executed and delivered a Service Agreement (the "Service
Agreement"), in substantially the form attached hereto as EXHIBIT 7.7,
pursuant to which Pentegra will provide management services to the Practice.
Dentist shall have executed and delivered a Dentist Agreement in
substantially the form attached as EXHIBIT 4.10 of the Service Agreement
pursuant to which Dentist shall, among other things, guaranty the obligations
of the Practice under the Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his
or her employment agreement and executed an employment agreement ("Employment
Agreement") with the Practice in form and substance attached hereto as
EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra.
<PAGE>
7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all
necessary government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness,
receivables or payables between Dentist and its affiliates and Dentist shall
not have any liabilities, including indebtedness, guaranties and capital
leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Dentist shall have named Pentegra as an additional
insured on irs liability insurance program in accordance with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Dentist since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. DENTIST'S CONDITIONS PRECEDENT.
The obligations of Dentist hereunder are subject to fulfillment at or prior
to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Pentegra contained herein shall have been true and correct in
all respects when initially made and shall be true and correct in all
respects as of the Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Dentist shall have received all documents,
duly executed in form satisfactory to Dentist and its counsel, referred to in
SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by
<PAGE>
Pentegra, subject only to official notification of issuance.
8.6 CONSENTS AND APPROVALS. Pentegra shall have obtained all
necessary government and other third-party approvals and consents.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF DENTIST. Within five business days after requested
by Pentegra, Dentist shall deliver to Pentegra the following, all of which
shall be in a form satisfactory to counsel to Pentegra and shall be held by
Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing,
pursuant to an escrow agreement or letter agreement in form and substance
mutually acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals of
all documents required by that agreement, including but not limited to the
Guaranty Agreemen and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a bill of sale conveying the Assets to Pentegra;
(d) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(e) certificates of Dentist dated as of the Closing Date, (i) as to
the truth and correctness of the representations and warranties of Dentist
contained herein; (ii) as to the performance of and compliance by Dentist with
all covenants contained herein; and (iii) certifying that all conditions
precedent of Dentist to the Closing have been satisfied;
(f) an opinion of counsel to Dentist opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Dentist, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Pentegra;
(g) non-foreign affidavits executed by Dentist;
(h) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(i) an executed Registration Rights Agreement between Pentegra and
Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(j) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Dentist the following, all of which shall be in a form
satisfactory to counsel to Dentist and shall be held by Jackson & Walker,
L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an
escrow agreement or letter agreement in form and substance mutually
acceptable to the parties hereto:
<PAGE>
(a) the Acquisition Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance of
this Agreement and all related documents and agreements each certified by the
Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii) certifying
that all conditions precedent of Pentegra to the Closing have been satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and the
State of incorporation of Dentist;
(h) an opinion of counsel to Pentegra opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Pentegra, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Dentist;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Dentist to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement
or in any Exhibit attached hereto, any agreement executed pursuant hereto,
and any certificate executed and delivered by any party pursuant to the terms
of this Agreement, shall constitute representations and warranties of Dentist
or of Pentegra, as the case may be. All such representations and warranties,
and all representations and warranties expressly labeled as such in this
Agreement shall survive the date of this Agreement and the Closing Date for a
period of three (3) years following the Closing Date, except that (i) the
representations and warranties with respect to environmental and medical
waste laws and health care laws and matters and tax representations shall
survive the expiration of the applicable statute of limitations. Each party
covenants with the other parties not to make any claim with respect to such
representations and warranties, against any party after the date on which
such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof,
unless such party has timely given the notice required in SECTION 10.2, 10.3
or 10.4 hereof, as the case may be. Each party hereby releases, acquits and
discharges the other party from any and all claims and demands, actions and
causes of action, damages, costs, expenses and rights of setoff with respect
to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable,
are not timely
<PAGE>
provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION
10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES
(INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL
THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY
PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF,
OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION
10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS
AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS
SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED
PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS,
DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT
LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING
FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER,
<PAGE>
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR AFTER
THE CLOSING DATE,
(D) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR
AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT,
(E) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION,
PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE
OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(F) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
(G ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS
COUNSEL BY THE DENTIST IN WRITING SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY
PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF,
OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the
defense of such action or proceeding, such Indemnified Person shall notify
Indemnitor thereof. If any such action or other proceeding shall be brought
against any Indemnified Person, Indemnitor shall, upon written notice given
within a reasonable time following receipt by Indemnitor of such notice from
Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen
<PAGE>
by Indemnitor, or (b) a conflict or potential conflict exists between
Indemnitor and such Indemnified Person that would make such separate
representation advisable; provided, however, that in no event shall
Indemnitor be required to pay fees and expenses hereunder for more than one
firm of attorneys of Indemnified Person in any jurisdiction in any one action
or proceeding or group of related actions or proceedings. Indemnitor shall
not, without the prior written consent of any Indemnified Person, settle or
compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding to which such Indemnified Person is a
party unless such settlement, compromise or consent includes an unconditional
release of such Indemnified Person from all liability arising or potentially
arising from or by reason of such claim, action or proceeding.
10.5 LIMITATION ON INDEMNIFICATION. Notwithstanding anything
contained herein, Dentist shall not be required to indemnify Pentegra unless
and to the extent that the aggregate amount of damages, losses, liabilities,
costs and other sums ("Damages") incurred by Pentegra shall exceed an amount
equal to $30,000.00. In no event shall Pentegra be required to indemnify
Dentist unless and to the extent that the aggregate amount of Damages
incurred by Dentist exceeds $30,000.00.
10.6 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Dentist giving rise to
indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be
entitled to offset the amount of damages incurred by it as a result of such
breach of warranty, representation, covenant or agreement against any amounts
payable by Pentegra, including the amounts payable under the Service
Agreement; provided, however, that Pentegra shall provide Dentist with
fifteen (15) days notice prior to such setoff during which time Dentist may
object to such offset providing such reasons for the dispute in which case
the parties shall proceed to arbitration in accordance with the terms of this
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Dentist
contained in this Agreement or in any certificate or other document executed and
delivered by Dentist pursuant to this Agreement is or becomes untrue or breached
in any material respect or if Dentist fails to comply in any material respect
with any covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
(c) at any time by Dentist if any representation or warranty of Pentegra
contained in this Agreement or in any certificate or other document executed and
delivered by Pentegra pursuant to this Agreement is or becomes untrue or
breached in any material respect or if Pentegra fails to comply in any material
respect with any covenant or agreement contained herein and such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof; or
(d) by Pentegra or Dentist if the transaction contemplated hereby shall
not have been consummated by December 31, 1997.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares
of Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer
shall be treated as effective for any purpose or (b) engage in any
transaction,
<PAGE>
whether or not with respect to any shares of Pentegra Common Stock or any
interest therein, the intent or effect of which is to reduce the risk of
owning shares of Pentegra Common Stock. The certificates evidencing the
Pentegra Common Stock delivered to Dentist pursuant to the terms hereof will
bear a legend substantially in the form set forth below and containing such
other information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required
to give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order
placed with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the
shares of Pentegra Common Stock to be delivered to Dentist pursuant to this
Agreement have not been and will not be registered under the Securities Act
of 1933 and may not be resold without compliance with the Securities Act of
1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this
Agreement is being acquired solely for its own account, for investment
purposes only and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution. Dentist
covenants, warrants and represents that none of the shares of Pentegra Common
Stock issued to it will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after full compliance with all of
the applicable provisions of the Securities Act, as amended, and the rules
and regulations of the Securities Exchange Commission and applicable state
securities laws and regulations. All certificates evidencing shares of
Pentegra Common Stock shall bear the following legend in addition to the
legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the
Securities Act of 1933 (the "Act") and may only be sold or otherwise
transferred if the holder hereof complies with the Act and applicable
securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Dentist resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the
economic risk of an investment in Pentegra Common Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and
has such knowledge and experience in financial and business matters that they
are capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect its own interests in connection with
the acquisition of the Pentegra Common Stock. Dentist and its
representatives have had an adequate opportunity to ask questions and receive
answers from the officers of Pentegra concerning any and all matters relating
to the background and experience of the officers and directors of Pentegra,
the plans for the operations of the business of Pentegra, and any plans for
additional acquisitions and the like. Dentist and its representatives have
asked any and all questions in the nature described in the preceding sentence
and all questions have been answered to their satisfaction. Dentist is an
"accredited investors" as defined in Regulation D of the Securities Act of
1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes
and acknowledges that it had in the past, currently have, and in the future may
possibly have, access to certain confidential information of Pentegra that is
valuable, special and unique assets of Pentegra's businesses. Dentist agrees
that it will not disclose such confidential information to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
unless (i) such information becomes available to or known by the public
generally through no fault of Dentist, (ii) disclosure is required by law or the
order of any governmental
<PAGE>
authority under color of law, provided, that prior to disclosing any
information pursuant to this clause (ii), Dentist shall, if possible, give
prior written notice thereof to the other parties hereto, and provide such
other parties hereto with the opportunity to contest such disclosure, (iii)
Dentist reasonably believes that such disclosure is required in connection
with the defense of a lawsuit against the disclosing party, or (iv) Dentist
is the sole and exclusive owner of such confidential information as a result
of the transactions contemplated hereunder or otherwise. In the event of a
breach or threatened breach by Dentist of the provisions of this SECTION 13,
Pentegra shall be entitled to an injunction restraining Dentist from
disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Pentegra from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. The obligations of the parties under this SECTION 13 shall
survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions
contemplated by this Agreement, together with the transactions contemplated
by the Other Agreement and the Initial Public Offering, will qualify as an
exchange meeting the requirements of Section 351 of the Code. The tax
returns (and schedules thereto) of Dentist and Pentegra shall be filed in a
manner consistent with such intention and Dentist and Pentegra shall each
provide the other with such tax information, reports, returns or schedules as
may be reasonably required to assist the other in so reporting the
transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Dentist:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
<PAGE>
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this Agreement,
whether or not such transactions are consummated. Without limiting the
generality of the foregoing and whether or not such liabilities may be deemed to
have been incurred in the ordinary course of business, Pentegra shall not be
liable to or required to pay, either directly or indirectly, any fees and
expenses of legal counsel, accountants, auditors or other persons or entities
retained by Dentist for services rendered in connection with negotiating and
closing the transactions contemplated by this Agreement or the documents to be
executed in connection herewith, whether or not such costs or expenses are
incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure, either
written or oral, regarding the transactions contemplated by this Agreement
without the prior written consent of the other party, provided that the
foregoing shall not prohibit any disclosure (a) by press release, filing or
otherwise that Pentegra has determined in good faith judgment to be required by
Federal securities laws or the rules of the National Association of Securities
Dealers, (b) to attorneys, accountants, investment bankers or other agents of
the parties assisting the parties in connection with the transactions
contemplated by this Agreement, and (c) by Pentegra in connection with the
conduct of its Initial Public Offering and conducting an examination of the
operations and assets of Dentist.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are
integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and not
only in connection with the specific representation in which they are explicitly
referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS
ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY
AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR
ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one and the same
instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder
<PAGE>
without the prior written consent of the other parties; provided, however,
that Pentegra may assign its rights and delegate its obligations hereunder to
any entity that is an affiliate of Pentegra. For purposes of this Agreement
an "affiliate" of Pentegra shall include any entity that, through one or more
intermediaries is, controlled, controlled by or under common control with,
Pentegra. Upon any such assignment prior to the Closing, all references
herein to Pentegra (including those to Pentegra Common Stock) shall be deemed
to include references to the assignee and the assignee's common stock.
Notwithstanding any such assignment, Pentegra shall not, absent a written
release from Dentist, be relieved from its obligations to Dentist under this
Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Dentist, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a pro
rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing, and
signed by the parties hereto. The waiver of any of the terms and conditions of
this Agreement shall not be construed as a waiver of any other terms and
conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist
(hereinafter referred to as a "Party"), whether made before or after the
institution of any legal proceeding, any dispute among the parties hereto in
any way arising out of, related to, or in connection with this Agreement
(hereinafter a "Dispute"), shall be resolved by binding arbitration in
accordance with the terms of this Section (hereinafter the "Arbitration
Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in accordance
with the terms of this Arbitration Program, the Commercial Arbitration Rules of
the AAA. In the event of any inconsistency between this Arbitration Program and
those rules or statutes, then the terms of this Arbitration Program shall
control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been completed
and the arbitrators have determined each party's post-arbitration obligations
and responsibilities as it relates to such warranties and covenants. No
provision of, nor the exercise of any rights under, this Arbitration Program
shall limit the right of any Party at any time to seek or use ancillary or
preliminary judicial or non-judicial self help remedies for the purposes of
obtaining, perfecting, preserving, or foreclosing upon any personal property in
which there has been granted a security interest or lien by a Party in the
Documents. In Disputes involving indebtedness or other monetary obligations,
each Party agrees that the other Party may proceed against all liable persons,
jointly and severally against one or more of them, without impairing rights
against other liable persons. Nor shall a Party be required to join the
principal obligor or any other liable persons (e.g., sureties or guarantors) in
any proceeding against a particular person. A Party may release or settle with
one or more liable persons as the Party deems fit without releasing or impairing
rights to proceed against any
<PAGE>
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing, of
that Party's desire to arbitrate a dispute; and each Party shall, within twenty
(20) days from the date such notification is received, select an arbitrator, and
those two arbitrators shall select a third arbitrator within ten (10) days
thereafter. The issues or claims in dispute shall be committed to writing,
separately stated and numbered, and each party's proposed answers or contentions
shall be signed below the questions. Failure by a party to select an arbitrator
within the prescribed time period shall serve as that Party's acquiescence and
acceptance of the other party's selection of arbitrator. The arbitrators shall
resolve all Disputes in accordance with the applicable substantive law. Any
Dispute shall be decided by a majority vote of three arbitrators, unless the
claim or amount in controversy does not exceed $100,000.00, in which case a
single arbitrator (who shall have authority to render a maximum award of
$100,000.00, including all damages of any kind, costs and fees) may decide the
Dispute. The arbitrators may grant any remedy or relief that the arbitrators
deem just and equitable and within the scope of this Arbitration Program. The
arbitrators may also grant such ancillary relief as is necessary to make
effective the award. In all arbitration proceedings the arbitrators shall make
specific and written findings of fact and conclusions of law. In all
arbitration proceedings in which the amount in controversy exceeds $100,000.00,
in the aggregate, the Parties shall have in addition to the statutory right to
seek vacation or modification of any award pursuant to applicable law, the right
to seek vacation or modification of any award that is based in whole, or in
part, on an incorrect or erroneous ruling of law by appeal to an appropriate
court having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must be
filed in a court having jurisdiction over the Dispute within 15 days from the
date the award in rendered. The arbitrators' findings of fact shall be binding
on all Parties and shall not be subject to further review except as otherwise
allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in writing
by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the
headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this
Arbitration Program shall survive any termination, amendment, or expiration of
the Documents, unless the Parties otherwise expressly agree in writing making
specific reference to this Arbitration Program. To the extent permitted by
applicable law, the arbitrator shall have the power to award recovery of all
costs and fees (including attorney's fees, administrative fees, and arbitrators'
fees) to the prevailing Party. This Arbitration Program may be amended,
changed, or modified only by a writing which specifically refers to this
Arbitration Program and which is signed by all the Parties. If any term,
covenant, condition or provision of the Arbitration Program is found to be
unlawful or invalid or unenforceable, such illegality or invalidity or
unenforceable shall not affect the legality, validity or enforceability of the
remaining parts of this Arbitration Program, and all such remaining parts hereof
shall be valid and enforceable and have full force and effect as if the illegal,
invalid or unenforceable part had not been included. Each Party agrees to keep
all Disputes and arbitration proceedings strictly confidential, except for
disclosures of information required in the ordinary course of business of the
Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be found
to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect. In lieu of such
provision, there shall be added automatically as part of this Agreement, a
provision as similar in its terms to such provision as may be possible and be
legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
--------------------------------------
Its: Senior VP
--------------------------------------
/s/ James M. McDonough
-------------------------------------------
James M. McDonough, D.D.S.
<PAGE>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 [intentionally omitted]
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
JAMES W. MEDLOCK, D.D.S., P.A.,
and
JAMES MEDLOCK, D.D.S.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . 3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
<PAGE>
<TABLE>
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Section 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 12
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 12
Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 13
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 13
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 13
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 14
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 14
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS . . . . . . . . . . . . . 17
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 18
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 19
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 20
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . . . 21
14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . 22
14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . 22
14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . 22
14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed
as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra"), JAMES W. MEDLOCK, D.D.S., P.A., a Florida
professional association ("Contributor") and JAMES MEDLOCK, D.D.S.,
shareholder of Contributor (referred to herein as "Shareholder" or
"Shareholders").
WITNESSETH:
WHEREAS, Contributor operates a dental practice ("Business") and
Pentegra is engaged in the business of managing certain non-dentistry
aspects of dental practices;
WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra
desires to receive from Contributor, certain assets of Contributor;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Contributor, the "Target
Companies");
WHEREAS, it is intended for Federal income tax purposes that the
transfers contemplated by this Agreement, the Other Agreements and Pentegra's
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an
exchange within the meaning of Section 351 of the Internal Revenue Code of
1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION
1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and
conditions contained herein, on the Closing Date, Contributor shall convey,
transfer, deliver and assign to Pentegra or any affiliate of Pentegra
designated by Pentegra all of Contributor's right, title and interest in and
to those certain assets described on EXHIBIT 1.1 attached hereto
(individually, "Asset", and collectively "Assets"), free and clear of all
obligations, security interests, claims, liens and encumbrances, except as
specifically assumed, or taken subject to, by Pentegra pursuant to SECTION
1.3(b) hereof.
<PAGE>
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and contributed hereunder, and Contributor shall retain all of
its right, title and interest in and to, the assets not specifically
transferred hereunder, including without limitation, the assets described on
EXHIBIT 1.2 (the "Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Contributor
contained herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Contributor the consideration
specified in ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Contributor listed on EXHIBIT
1.3(b) attached hereto to the extent that such obligations, commitments,
liabilities and indebtedness are current and not otherwise in default. (the
"Assumed Liabilities"). Notwithstanding any contrary provision contained
herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra
assume: (i) any liability, commitment or obligation or trade payable or
indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability
set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of
or default under such contracts, leases, commitments or obligations which
occurred on or before the Closing Date; (iii) any liability for any employee
benefits payable to employees of Contributor, including, but not limited to,
liabilities arising under any Contributor Plan (as defined in SECTION 2.21
hereof); (iv) any liability based upon or arising out of a violation of any
antitrust or similar restraint-of-trade laws by any Shareholder or
Contributor, including, without limiting the generality of the foregoing, any
such antitrust liability which may arise in connection with agreements,
contracts, commitments or orders for the sale of goods or provision of
services by Contributor reflected on the books of Contributor at or prior to
the Closing Date; (v) any liability based upon or arising out of any tortious
or wrongful actions of Contributor, any licensed professional employee or
independent contractor of Contributor or any Shareholder, (vi) any liability
for the payment of any taxes of Contributor or any Shareholder, including
without limitation, sales, use and other transfer taxes and income taxes
arising from or by reason of the transactions contemplated by this Agreement;
(vii) any indebtedness secured by deeds of trust or mortgages on real
property; nor (viii) any liability incurred or to be incurred pursuant to any
malpractice or other suits or actions pending against Contributor or any
Shareholder.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement,
Contributor and Shareholders shall execute and deliver all such deeds, bills
of sale, assignments and assurances and take and do all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any
and all right, title and interest in, to and under the Assets in Pentegra or
otherwise to carry out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS.
Contributor and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Contributor is a professional
corporation or association, as applicable, duly organized, validly existing
and in good standing under the laws of the State of
<PAGE>
Florida. Contributor has all necessary corporate powers to own all of its
assets and to carry on its business as such business is now being conducted.
Contributor does not own stock in or control, directly or indirectly, any
other corporation, association or business organization, nor is Contributor a
party to any joint venture or partnership. The Shareholders are the sole
shareholders of Contributor and own all outstanding shares of capital stock
free of all security interests, claims, encumbrances and liens in the amounts
set forth on EXHIBIT 2.1. Each share of Contributor's common stock has been
legally and validly issued and fully paid and nonassessable. No shares of
capital stock of Contributor are owned by Contributor in treasury. There are
no outstanding (a) bonds, debentures, notes or other obligations the holders
of which have the right to vote with the stockholders of Contributor on any
matter, (b) securities of Contributor convertible into equity interests in
Contributor, or (c) commitments, options, rights or warrants to issue any
such equity interests in Contributor, to issue securities of Contributor
convertible into such equity interests, or to redeem any securities of
Contributor. No shares of capital stock of Contributor have been issued or
disposed of in violation of the preemptive rights, rights of first refusal or
similar rights of any of Contributor's stockholders. Contributor is not
required to qualify to do business as a foreign corporation in any other
state or jurisdiction by reason of its business, properties or activities in
or relating to such other state or jurisdiction. Contributor does not have
any assets, employees or offices in any state other than the state set forth
in the first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the corporate
power to execute, deliver and perform this Agreement and all agreements and
other documents executed and delivered by it pursuant to this Agreement or to
be executed and delivered on the Closing Date, and has taken all action
required by law, its Articles or Certificate of Incorporation, its Bylaws or
otherwise, to authorize the execution, delivery and performance of this
Agreement and such related documents. Each Shareholder has the legal
capacity to enter into and perform this Agreement and the other agreements to
be executed and delivered in connection herewith. Contributor has obtained
the approval of its stockholders necessary to the consummation of the
transactions contemplated herein. This Agreement and all agreements and
documents executed and delivered in connection herewith have been, or will be
as of the Closing Date, duly executed and delivered by Contributor and
Shareholders, as appropriate, and constitute or will constitute the legal,
valid and binding obligations of Contributor and Shareholders, enforceable
against Contributor and Shareholders in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally or the availability of
equitable remedies. The execution and delivery of this Agreement, and the
agreements executed and delivered pursuant to this Agreement or to be
executed and delivered on the Closing Date, do not, and, subject to the
receipt of consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, violate any provision of the Articles or
Certificate of Incorporation or Bylaws of Contributor or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or
decree to which Contributor or any Shareholder is a party or by which
Contributor or any Shareholder is bound, or violate any material restrictions
of any kind to which Contributor is subject, or result in any lien or
encumbrance on any of Contributor's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to
the knowledge of Contributor and Shareholders, threatened, which may result
in the revocation, cancellation or suspension, or any adverse modification,
of any such licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Contributor or
<PAGE>
Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been declared or paid by Contributor on any of its capital
stock since the Balance Sheet Date. No repurchase of any of Contributor's
capital stock has been approved, effected or is pending, or is contemplated
by Contributor.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Contributor and all
amendments thereto have been delivered to Pentegra. The minute books of
Contributor contain accurate minutes of all meetings of and consents to
actions taken without meetings of the Board of Directors and stockholders of
Contributor since its formation. The books of account of Contributor have
been kept accurately in the ordinary course of business and the revenues,
expenses, assets and liabilities of Contributor have been properly recorded
in such books.
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore
furnished Pentegra with copies of its unaudited balance sheet and related
unaudited statements of income, retained earnings and cash flows for its
prior two full fiscal years, as well as copies of its unaudited balance sheet
as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet"
and the latest date thereof shall be referred to as the "Balance Sheet Date")
and any related unaudited statements of income, retained earnings, schedule
of accounts receivable, accounts payable and accrued liabilities, and cash
flows for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Contributor as
of the dates and for the periods indicated and reflect all fixed and
contingent liabilities of Contributor.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Contributor or any Shareholder leases, as lessor or lessee,
real or personal property used in operating the Business, related to the
Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and
enforceable in accordance with their respective terms, and there is not under
any such lease any existing default by Contributor, as lessor or lessee, or
any condition or event of which any Shareholder or Contributor has knowledge
which with notice or lapse of time, or both, would constitute a default, in
respect of which Contributor or Shareholders have not taken adequate steps to
cure such default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Contributor and Shareholders have
no knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good, valid
and marketable title to all of the Assets, free and clear of any liens,
claims, charges, exceptions or encumbrances, except for those, if any, which
are set forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all
encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances
indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the
Closing Date and evidence of such releases of liens and claims shall be
provided to Pentegra on the Closing Date and the Assets shall not be used to
satisfy such liens, claims or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Contributor, are in good, current, standard and merchantable
condition and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Contributor has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all
<PAGE>
predecessor companies of Contributor, including the names of any
entities from whom Contributor previously acquired significant assets.
Except for off-the-shelf software licenses and except as set forth on EXHIBIT
2.12, Contributor is not a licensee in respect of any patents, trademarks,
service marks, trade names, copyrights or applications therefor, or
manufacturing processes, formulas or trade secrets or similar items and no
such licenses are necessary for the conduct of the Business or the use of the
Assets. No claim is pending or has been made to the effect that the Assets
or the present or past operations of Contributor in connection with the
Assets or Business infringe upon or conflict with the asserted rights of
others to any patents, patent rights, manufacturing processes, trade names,
trademarks, service marks, inventions, licenses, specialized treatment
protocols, copyrights, formulas, know-how and trade secrets. Contributor has
the sole and exclusive right to use all Assets constituting proprietary
rights without infringing or violating the rights of any third parties and no
consents of any third parties are required for the use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the name of each director and officer of
Contributor and the offices held by each, (b) the most recent payroll report
of Contributor, showing all current employees of Contributor and their
current levels of compensation, (c) promised increases in compensation of
employees of Contributor that have not yet been effected, (d) oral or written
employment agreements, consulting agreements or independent contractor
agreements (and all amendments thereto) to which Contributor is a party,
copies of which have been delivered to Pentegra, and (e) all employee
manuals, materials, policies, procedures and work-related rules, copies of
which have been delivered to Pentegra. Contributor is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Contributor has not engaged in any unfair labor
practice. There are no unfair labor practices charges or complaints pending
or threatened against Contributor, and Contributor has never been a party to
any agreement with any union, labor organization or collective bargaining
unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Contributor nor the
Business nor any of the Assets is subject to any pending, nor does
Contributor or any Shareholder have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Contributor, any Shareholder, the Business, the
Assets or the transactions contemplated by this Agreement, and, to the
knowledge of Contributor and Shareholders, no basis for any such action
exists, nor is there any legal impediment of which Contributor or any
Shareholder has knowledge to the continued operation of its business or the
use of the Assets in the ordinary course, subject to consents set forth on
EXHIBIT 2.4.
2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Contributor ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted or may be made
by any party thereto. Except as indicated on such Exhibits, there is not
under any such Contract any existing default by Contributor or any
Shareholder, or any condition or event of which Contributor or any
Shareholder has knowledge which with notice or lapse of time, or both, would
constitute a default. Contributor and Shareholders have no knowledge of any
default by any other party to such Contracts. Contributor and Shareholders
have not received notice of the intention of any party to any Contract to
cancel or terminate any Contract and have no reason to believe that any
amendment or change to any Contract is contemplated by any party thereto.
Other than those contracts, obligations and commitments listed on EXHIBIT
2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Contributor are not a party to any
material written or oral agreement contract, lease or arrangement, including
without limitation, any:
(a) Contract related to the Assets other than this Agreement;
<PAGE>
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
the Contributor or Shareholders, oral or written, that provide for
prepayments or deferred installment payments; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Contributor on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16,
Contributor has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(d) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Contributor since the Balance
Sheet Date;
<PAGE>
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(j) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties,
assets or business or the Business or the Assets, or experienced any other
material adverse change in its financial condition, assets, prospects,
liabilities or business;
(n) Declared or paid a distribution, payment or dividend of any
kind on the capital stock of Contributor;
(o) Repurchased, approved any repurchase or agreed to repurchase
any of Contributor's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Contributor has filed all tax returns (including tax
reports and other statements) required to have been filed by it, and has paid
all taxes (including any interest, penalty or additions thereto) required to
have been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Contributor has not received any notice that any tax deficiency
or delinquency has been or may be asserted against Contributor. There are
no audits relating to taxes of Contributor pending or in process or, to the
knowledge of Contributor, threatened. Contributor is not currently the
beneficiary of any waiver of any statute of limitations in respect of taxes
nor of any extension of time within which to file any tax return or to pay
any tax assessment or deficiency. There are no liens or encumbrances
relating to taxes on or threatened against any of the assets of Contributor.
Contributor has withheld and paid all taxes required by law to have been
withheld and paid by it. Neither Contributor nor any predecessor of
Contributor is or has been a party to any tax allocation or sharing agreement
or a member of an affiliated group of corporations filing a consolidated
Federal income tax return. Contributor has delivered to Pentegra correct and
complete copies of Contributor's three most recently filed annual state,
local and Federal income tax returns, together with all examination reports
and statements of deficiencies assessed against or agreed to by Contributor
during the three calendar year period preceding the date of this Agreement.
Contributor has neither made any payments, is obligated to make any payments,
or is a party to any agreement that under any circumstance could obligate it
to make any payments that will not be deductible under Code section 280G.
<PAGE>
(b) Contributor does not intend to dispose of any of the shares of
Pentegra Common Stock to be received hereunder and is not a party to any
plan, arrangement or agreement for the disposition of such shares.
Contributor and Shareholders have no knowledge, after due inquiry, of any
such intent, plan, arrangement or agreement by any Shareholder. Nothing
contained herein shall prohibit Contributor from selling such shares of
Pentegra Common Stock after the designated holding period and in accordance
with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated
by this Agreement which may be now or hereafter asserted against Pentegra,
Contributor or Contributor's shareholders resulting from any action taken by
Contributor or any Shareholder or their respective agents or employees, or
any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Contributor did not have, as of the Balance
Sheet Date, and has not incurred since that date and will not have incurred
as of the Closing Date, any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
other than those incurred in the ordinary course of business or as set forth
on EXHIBIT 2.16. Contributor and Shareholders do not know, or have
reasonable grounds to know, of any basis for the assertion against
Contributor or any Shareholder as of the Balance Sheet Date, of any claim or
liability of any nature in any amount not fully reflected or reserved against
on the Balance Sheet, or of any claim or liability of any nature arising
since that date other than those incurred in the ordinary course of business
or contemplated by this Agreement. All indebtedness of Contributor
(including without limitation, indebtedness for borrowed money, guaranties
and capital lease obligations) is described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Contributor, each Shareholder and each licensed
professional of Contributor carries property, liability, malpractice,
workers' compensation and such other types of insurance as is customary in
the industry. Valid and enforceable policies in such amounts are outstanding
and duly in force and will remain duly in force through the Closing Date.
All such policies are described in EXHIBIT 2.20 attached hereto and true and
correct copies have been delivered to Pentegra. Neither Shareholders nor
Contributor have not received notice or other communication from the issuer
of any such insurance policy cancelling or amending such policy or
threatening to do so. Neither Contributor, nor any Shareholder nor any
licensed professional employee of Contributor has any outstanding claims,
settlements or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Contributor has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Contributor
Plan," and collectively "Contributor Plans") have been operated and
administered in all material respects in accordance with all applicable laws,
rules and regulations, including without limitation, ERISA, the Internal
Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964,
as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in
Employment Act of 1967, as amended, and the related rules and regulations
adopted by those Federal agencies responsible for the administration of such
laws. No act or failure to act by Contributor has resulted in a "prohibited
transaction" (as defined in ERISA) with respect to the Contributor Plans. No
"reportable event" (as defined in ERISA) has occurred with respect to any of
the Contributor Plans. Contributor has not previously made, is not currently
making, and is not obligated in any way to make, any contributions to any
multiemployer plan within the meaning of the Multi-Employer Pension Plan
Amendments Act of 1980. With respect to each Contributor Plan, either (i)
the value of plan assets
<PAGE>
(including commitments under insurance contracts) is at least equal to the
value of plan liabilities or (ii) the value of plan liabilities in excess of
plan assets is disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Contributor, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Shareholders and
Contributor's licensed professional employees, and the conduct of the
Business and use of the Assets, have complied with all applicable laws,
rules, regulations and licensing requirements, including, without limitation,
the Federal Environmental Protection Act, the Occupational Safety and Health
Act, the Americans with Disabilities Act and any environmental laws and
medical waste laws, and there exist no violations by Contributor, any
Shareholder or any licensed professional employee of Contributor of any
Federal, state or local law or regulation. Contributor and Shareholders have
not received any notice of a violation of any Federal, state and local laws,
regulations and ordinances relating to the operations of the Business and
Assets and no notice of any pending inspection or violation of any such law,
regulation or ordinance has been received by Contributor.
2.24 THIRD PARTY PAYORS. Contributor, Shareholders and each licensed
professional employee or independent contractor of Contributor has timely
filed all claims or other reports required to be filed with respect to the
purchase of services by third-party payors, and all such claims or reports
are complete and accurate, and has no liability to any payor with respect
thereto. There are no pending appeals, overpayment determinations,
adjustments, challenges, audit, litigation or notices of intent to open
Medicare or Medicaid claim determinations or other reports required to be
filed by Contributor, any Shareholder and each licensed professional employee
of Contributor. Neither Contributor, nor any Shareholder, nor any licensed
professional employee of Contributor has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Contributor, Shareholders and Contributor's licensed professional employees
has not (a) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made
any false statement or representation of a material fact for use in
determining rights to any benefit or payment; (c) failed to disclose
knowledge of the occurrence of any event affecting the initial or continued
right to any benefit or payment on its own behalf or on behalf of another,
with the intent to fraudulently secure such benefit or payment; and (d)
violated any applicable state anti-remuneration or self-referral statutes,
rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Contributor or Shareholders in this Agreement, and no Exhibit or certificate
issued or executed by, or information furnished by, officers or directors of
Contributor or any Shareholder and furnished or to be furnished to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Contributor has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director
<PAGE>
or stockholder of Contributor, or their respective spouses, children or
affiliates, owns directly or indirectly, on an individual or joint basis, any
interest in, has a compensation or other financial arrangement with, or
serves as an officer or director of, any customer or supplier or competitor
of Contributor or any organization that has a material contract or
arrangement with Contributor.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Contributor's services which
accounted for more than 10% of revenues of Contributor in the preceding
fiscal year. Contributor has good relations with all such payors and other
material payors of Contributor and none of such payors has notified
Contributor that it intends to discontinue its relationship with Contributor
or to deny any claims submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Contributor and Shareholders
as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING: Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would
not have a material adverse effect, there are no proceedings pending or, to
the knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has
<PAGE>
knowledge to the continued operation of its business or the use of its Assets
in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Contributor or
any Shareholder pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
SECTION 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS.
Contributor and Shareholders, jointly and severally, agree that between
the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Shareholders
shall use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions.
Contributor and Shareholders agree to complete the Exhibits hereto to be
provided by them in form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Contributor and Shareholders shall operate the
Business and use the Assets in the ordinary course. Contributor and
Shareholders shall not enter into any lease, contract, indebtedness,
commitment, purchase or sale or acquire or dispose of any capital asset
relating to the Business or the Assets except in the ordinary course of
business. Contributor and Shareholders shall use their best efforts to
preserve the Business and Assets intact and shall not take any action that
would have an adverse effect on the Business or Assets. Contributor and
Shareholders shall use their best efforts to preserve intact the
relationships with payors, customers, suppliers, patients and others having
significant business relations with Contributor. Contributor and Shareholders
shall collect its receivables and pay its trade payables in the ordinary
course of business. Contributor and Shareholdes shall not introduce any new
method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Contributor and Shareholders shall permit
Pentegra and its authorized representatives access to, and make available for
inspection, all of the assets and business of Contributor, the Business and
the Assets, including employees, customers and suppliers and permit Pentegra
and its authorized
<PAGE>
representatives to inspect and make copies of all documents, records and
information with respect to the business or assets of Contributor, the
Business or the Assets as Pentegra or its representatives may request.
Contributor and Shareholders shall promptly notify Pentegra in writing of (a)
any notice or communication relating to a default or event that, with notice
or lapse of time or both, could become a default, under any contract,
commitment or obligation to which Contributor is a party or relating to the
Business or the Assets, and (b) any adverse change in Contributor's or the
Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor
and Shareholders shall use their best efforts to secure all necessary
approvals and consents of third parties to the consummation of the
transactions contemplated hereby, including consents described on EXHIBIT
2.4. Contributor and Shareholders shall use their best efforts to obtain all
licenses, permits, approvals or other authorizations required under any law,
rule, regulation, or otherwise to provide the services of Contributor
contemplated by the Service Agreement and to conduct the intended business of
Contributor and operate the Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance
with the provisions hereof, Contributor and Shareholders shall not, and shall
use its best efforts to cause Contributor's employees, agents and
representatives not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer, including without limitation, any proposal or offer to any
Shareholder, with respect to a merger, acquisition, consolidation or similar
transaction involving, or the purchase of all or any significant portion of
the assets or any equity securities of Contributor or engage in any
negotiations concerning, or provide any confidential information or data to,
or have any discussions with, any person relating to such proposal or offer,
and Contributor and Shareholders will immediately cease any such activities,
discussions or negotiations heretofore conducted with respect to any of the
foregoing. Contributor and Shareholders shall immediately notify Pentegra if
any such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby covenants
and agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Contributor or any entity might have any liability
whatsoever arising from any insurance, pension plan, employment tax or
similar liability of Contributor to any employee or other person or entity
(including, without limitation, any Contributor Plan and any liability under
employment contracts with Contributor) allocable to services performed prior
to the Closing Date. Contributor and Shareholders acknowledge that the
purpose and intent of this covenant is to assure that Pentegra shall have no
unfunded liability whatsoever at any time after the Closing Date with respect
to any of Contributor's employees or similar persons or entities, including,
without limitation, any Contributor Plan for the period prior to the Closing
Date.
4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash
compensation of any Shareholder (other than in the ordinary course of
business) or other employee or an independent contractor of Contributor,
adopt, amend or terminate any compensation plan, employment agreement,
independent contractor agreement, employee policies and procedures or
employee benefit plan, take any action that could deplete the assets of any
employee benefit, or fail to pay any premium or contribution due or file any
report with respect to any employee benefit plan, or take any other actions
with respect to its employees or employee matters which might have an adverse
effect upon Contributor, its business, assets or prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Contributor, nor will any repurchase
of any of Contributor's capital stock be approved or effected.
<PAGE>
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Shareholders
shall use their best efforts to take, or cause to be taken, all actions
necessary to effect the acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Contributor and Shareholders will not
change in any material respect the tax or financial accounting methods or
practices followed by Contributor (including any material change in any
assumption underlying, or any method of calculating, any bad debt, contingency
or other reserve), except as may be required by law or generally accepted
accounting principles. Contributor and Shareholders will duly, accurately and
timely (without regard to any extensions of time) file all returns, information
statements and other documents relating to taxes of Contributor required to be
filed by it, and pay all taxes required to be paid by it, on or before the
Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Contributor hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Contributor and Shareholders covenant and agree that all of the
creditors with respect to the Business and the Assets will be paid in full by
Contributor prior to the Closing Date, except to extent that any liability to
such creditors is assumed by Pentegra pursuant to this Agreement. If required
by Pentegra, Contributor and Shareholders shall furnish Pentegra with proof of
payment of all creditors with respect to the Business and the Assets.
Notwithstanding the foregoing, Contributor and Shareholders may dispute the
validity or amount of any such creditor's claim without being deemed to be in
violation of this SECTION 4.11, provided that such dispute is in good faith and
does not unreasonably delay the resolution of the claim and provided, further
that Contributor and Shareholders agree to indemnify and bond Pentegra for such
amounts as is satisfactory to Pentegra.
4.12 LEASE. If Contributor leases any of its premises from any Shareholder
or other affiliate of Contributor or any shareholder of Contributor, Pentegra
shall have entered into a building lease (the "Building Lease") with the owner
of such premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, (i) a five year initial
term plus three five-year renewal options, (ii) a lease rate equal to the fair
market value lease rate, as agreed to by Pentegra, and (iii) such other
provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Contributor and Shareholders shall cooperate
with all requests made by Pentegra for the purpose of allowing Pentegra to hire
those non-dental employees of Contributor designated by Pentegra, such
employment to be effective as of the Closing Date. Notwithstanding the above,
Contributor and Shareholders shall remain liable under any Contributor Plans for
any claims incurred by any employees or their spouses or dependents, and for all
compensation, bonuses, benefits and other such items and other liabilities
related to Contributor's employees incurred by Contributor prior to the Closing
Date.
4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges that all
employees of Contributor hired by Pentegra pursuant to SECTION 4.13 above,
shall be treated as "leased employees" (as defined in Code Section 414(n)) of
Contributor and shall be treated as Clinic employees for purposes of eligibility
and participation in Contributor Plans.
4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective as
of the Closing Date.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions.
<PAGE>
Pentegra agrees to complete the Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS.
Pentegra, Shareholders and Contributor agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Contributor and Shareholders shall
cooperate to promptly prepare and file with the Securities Exchange Commission
("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to
be filed by Pentegra in connection with its Initial Public Offering (including
the prospectus constituting a part thereof, the "Registration Statement").
Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits
and approvals required to carry out the transactions contemplated by this
Agreement and the Contributor and Shareholders shall furnish all information
concerning Contributor and Shareholders as may be reasonable requested in
connection with any such action.
Contributor and Shareholder represent and warrant that none of the
information or documents supplied or to be supplied by it specifically for
inclusion in the Registration Statement, by exhibit or otherwise, will, at the
time the Registration Statement and each amendment or supplement thereto, if
any, becomes effective under the Securities Act of 1933, 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, in light of the
circumstances under which they were made, not misleading. Contributor and
Shareholders shall be entitled to review the Registration Statement and each
amendment thereto, if any, prior to the time each becomes effective under the
Securities Act of 1933.
Contributor and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by Pentegra
in connection with the preparation of the Registration Statement and each
amendment or supplement thereto, or any other statement, filing, notice or
application made by or on behalf of each such party or any of its subsidiaries
to any governmental entity in connection with the transactions contemplated by
the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at or
prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Contributor and Shareholders contained herein shall have been true and correct
in all respects when initially made and shall be true and correct in all
respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Contributor and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Contributor and Shareholders
prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
<PAGE>
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Contributor shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Contributor, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and Pentegra shall
have executed and delivered a Service Agreement (the "Service Agreement"), in
substantially the form attached hereto as EXHIBIT 7.7, pursuant to which
Pentegra will provide management services to the Contributor. Each Shareholder
shall have executed and delivered a Guaranty Agreement in substantially the form
attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder
shall, among other things, guaranty the obligations of Contributor under the
Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated, and
caused each shareholder of Contributor that has an existing employment agreement
with Contributor to have terminated his or her employment agreement with
Contributor and shall have executed an employment agreement ("Employment
Agreement") with Contributor in form and substance attached hereto as EXHIBIT
7.8 and otherwise satisfactory to Contributor and Pentegra.
7.9 CONSENTS AND APPROVALS. Contributor and Shareholders shall have
obtained all necessary government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly
executed in form satisfactory to Pentegra and its counsel, referred to in
SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or
payables between Contributor and its shareholders or affiliates and Contributor
shall not have any liabilities, including indebtedness, guaranties and capital
leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Contributor and Shareholders shall have named Pentegra as
an additional insured on their liability insurance program in accordance with
SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Contributor since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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.
At or prior to the date that the Registration Statement is declared effective by
the SEC, Pentegra shall have received all state securities and "Blue Sky"
permits necessary to consummate the transactions contemplated hereby. The
Pentegra Common Stock shall have been approved for listing on Nasdaq or other
exchange selected by Pentegra, subject only to official notification of
issuance.
SECTION 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
<PAGE>
The obligations of Contributor and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Pentegra contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Contributor shall have received all documents,
duly executed in form satisfactory to Contributor and its counsel, referred to
in SECTION 9.2.
8.5 SECURITIES APPROVAL. 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.
At or prior to the date that the Registration Statement is declared effective by
the SEC, Pentegra shall have received all state securities and "Blue Sky"
permits necessary to consummate the transactions contemplated hereby. The
Pentegra Common Stock shall have been approved for listing on Nasdaq or other
exchange selected by Pentegra, subject only to official notification of
issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. Within five business days
after requested by Pentegra, Contributor and Shareholders shall deliver to
Pentegra the following, all of which shall be in a form satisfactory to counsel
to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra)
in escrow pending Closing, pursuant to an escrow agreement or letter agreement
in form and substance mutually acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals of
all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of
Contributor authorizing the execution, delivery and performance of this
Agreement, the Service Agreement, the Employment Agreements and all related
documents and agreements each certified by the Secretary as being true and
correct copies of the original thereof;
(d) a bill of sale conveying the Assets to Pentegra;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
<PAGE>
(f) certificates of the Shareholders and a duly authorized officer of
Contributor dated as of the Closing Date, (i) as to the truth and correctness of
the representations and warranties of Contributor and Shareholder contained
herein; (ii) as to the performance of and compliance by Contributor and
Shareholder with all covenants contained herein; and (iii) certifying that all
conditions precedent of Contributor and Shareholders to the Closing have been
satisfied;
(g) a certificate of the Secretary of Contributor certifying as to
the incumbency of the directors and officers of Contributor and as to the
signatures of such directors and officers who have executed documents delivered
at the Closing on behalf of Contributor;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Contributor and any state of required
foreign qualification of Contributor establishing that Contributor is in
existence and is in good standing to transact business in its state of
incorporation;
(i) an opinion of counsel to Contributor and Shareholder opining as
to the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Contributor, the enforceability of this Agreement and the other agreements and
documents to be executed in connection herewith, and other matters reasonably
requested by Pentegra;
(j) non-foreign affidavits executed by Contributor;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Contributor, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall
deliver to Contributor and Shareholder, the following, all of which shall be in
a form satisfactory to counsel to Contributor and Shareholders and shall be held
by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing,
pursuant to an escrow agreement or letter agreement in form and substance
mutually acceptable to the parties hereto:
(a) the Acquisition Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance of
this Agreement and all related documents and agreements each certified by the
Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii) certifying
that all conditions
<PAGE>
precedent of Pentegra to the Closing have been satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and the
State of incorporation of Contributor;
(h) an opinion of counsel to Pentegra opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Pentegra, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Contributor;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Contributor to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in
any Exhibit attached hereto, any agreement executed pursuant hereto, and any
certificate executed and delivered by any party pursuant to the terms of this
Agreement, shall constitute representations and warranties of Contributor and
Shareholders, jointly and severally, or of Pentegra, as the case may be. All
such representations and warranties, and all representations and warranties
expressly labeled as such in this Agreement shall survive the date of this
Agreement and the Closing Date for a period of five (5) years following the
Closing Date, except that (i) the representations and warranties with respect to
environmental and medical waste laws and health care laws and matters shall
survive for a period of fifteen (15) years and tax representations shall survive
until one year after the expiration of the applicable statute of limitations.
Each party covenants with the other parties not to make any claim with respect
to such representations and warranties, against any party after the date on
which such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless
such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4
hereof, as the case may be. Each party hereby releases, acquits and discharges
the other party from any and all claims and demands, actions and causes of
action, damages, costs, expenses and rights of setoff with respect to which the
notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely
provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD CONTRIBUTOR AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING CONTRIBUTOR AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"),
HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS,
SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO,
REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY
REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY,
<PAGE>
AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE
FURNISHED BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY
PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF,
OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. CONTRIBUTOR AND
SHAREHOLDERS (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD
PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND
EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS
SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED
PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS,
DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT
LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING
FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER, AND
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS WHETHER ON OR
AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY CONTRIBUTOR OR ITS SHAREHOLDERS OR THEIR CONSULTANTS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS
GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY
<PAGE>
OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE
CONTRIBUTOR OR SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY
PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF CONTRIBUTOR OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY
RELATED TO OR AFFILIATED WITH THE CONTRIBUTOR OR SHAREHOLDER ARISING FROM OR AS
A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF CONTRIBUTOR OR THE SHAREHOLDERS FOR COSTS AND
EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION
WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS AND
PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE CONTRIBUTOR OR ITS SHAREHOLDERS
SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION
STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR
SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED
OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS
SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the defense
of such action or proceeding, such Indemnified Person shall notify Indemnitor
thereof. If any such action or other proceeding shall be brought against any
Indemnified Person, Indemnitor shall, upon written notice given within a
reasonable time following receipt by Indemnitor of such notice from Indemnified
Person, be entitled to assume the defense of such action or proceeding with
counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person;
provided, however, that any Indemnified Person may at its own expense retain
separate counsel to participate in such defense. Notwithstanding the foregoing,
Indemnified Person shall have the right to employ separate counsel at
Indemnitor's expense and to control its own defense of such action or proceeding
if, in the reasonable opinion of counsel to such Indemnified Person, (a) there
are or may be legal defenses available to such Indemnified Person or to other
Indemnified Persons that are different from or additional to those available to
Indemnitor and which could not be adequately advanced by counsel chosen by
Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor
and such Indemnified Person that would make such separate representation
advisable; provided, however, that in no event shall Indemnitor
<PAGE>
be required to pay fees and expenses hereunder for more than one firm of
attorneys of Indemnified Person in any jurisdiction in any one action or
proceeding or group of related actions or proceedings. Indemnitor shall not,
without the prior written consent of any Indemnified Person, settle or
compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding to which such Indemnified Person is a
party unless such settlement, compromise or consent includes an unconditional
release of such Indemnified Person from all liability arising or potentially
arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Contributor or any Shareholder giving
rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra
shall be entitled to offset the amount of damages incurred by it as a result of
such breach of warranty, representation, covenant or agreement against any
amounts payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of
Contributor or Shareholder contained in this Agreement or in any certificate or
other document executed and delivered by Contributor or any Shareholder pursuant
to this Agreement is or becomes untrue or breached in any material respect or if
Contributor or any Shareholder fails to comply in any material respect with any
covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
(c) at any time by Contributor or any Shareholder if any representation or
warranty of Pentegra contained in this Agreement or in any certificate or other
document executed and delivered by Pentegra pursuant to this Agreement is or
becomes untrue or breached in any material respect or if Pentegra fails to
comply in any material respect with any covenant or agreement contained herein
and such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra, Shareholders or Contributor if the transaction
contemplated hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Contributor, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date,
Contributor shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of
Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer shall
be treated as effective for any purpose or (b) engage in any transaction,
whether or not with respect to any shares of Pentegra Common Stock or any
interest therein, the intent or effect of which is to reduce the risk of owning
shares of Pentegra Common Stock. The certificates evidencing the Pentegra
Common Stock delivered to Contributor pursuant to the terms hereof will bear a
legend substantially in the form set forth below and containing such other
information as Pentegra may deem necessary or appropriate:
<PAGE>
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Shareholders
acknowledge that the shares of Pentegra Common Stock to be delivered to
Contributor pursuant to this Agreement have not been and will not be registered
under the Securities Act of 1933 and may not be resold without compliance with
the Securities Act of 1933. The Pentegra Common Stock to be acquired by
Contributor pursuant to this Agreement is being acquired solely for its own
account, for investment purposes only and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution. Contributor covenants, warrants and represents that none of the
shares of Pentegra Common Stock issued to it will be offered, sold, assigned,
pledged, hypothecated, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the Securities Act, as
amended, and the rules and regulations of the Securities Exchange Commission and
applicable state securities laws and regulations. All certificates evidencing
shares of Pentegra Common Stock shall bear the following legend in addition to
the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Contributor resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Shareholders are able
to bear the economic risk of an investment in Pentegra Common Stock acquired
pursuant to this Agreement and can afford to sustain a total loss of such
investment and have such knowledge and experience in financial and business
matters that they are capable of evaluating the merits and risks of the proposed
investment and therefore have the capacity to protect their own interests in
connection with the acquisition of the Pentegra Common Stock. Contributor,
Shareholders and their representatives have had an adequate opportunity to ask
questions and receive answers from the officers of Pentegra concerning any and
all matters relating to the background and experience of the officers and
directors of Pentegra, the plans for the operations of the business of Pentegra,
and any plans for additional acquisitions and the like. Contributor,
Shareholders and their representatives have asked any and all questions in the
nature described in the preceding sentence and all questions have been answered
to their satisfaction. Contributor and Shareholders are "accredited investors"
as defined in Regulation D of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Contributor and Shareholders agree that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally through
no fault of Contributor or Shareholders, (ii) disclosure is required by law or
the order of any governmental authority under color of law, provided, that prior
to disclosing any information pursuant to this clause (ii), Contributor and
Shareholders shall, if possible, give prior written notice thereof to the other
parties hereto, and provide such other parties hereto with the
<PAGE>
opportunity to contest such disclosure, (iii) Contributor and Shareholders
reasonably believe that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party, or (iv) Contributor and
Shareholders are the sole and exclusive owner of such confidential
information as a result of the transactions contemplated hereunder or
otherwise. In the event of a breach or threatened breach by Contributor or
Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled
to an injunction restraining Contributor and Shareholders from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting Pentegra from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages. The
obligations of the parties under this SECTION 13 shall survive the
termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement, together with the transactions contemplated by the Other
Agreement and the Initial Public Offering, will qualify as an exchange meeting
the requirements of Section 351 of the Code. The tax returns (and schedules
thereto) of Shareholders, Contributor and Pentegra shall be filed in a manner
consistent with such intention and Contributor and Pentegra shall each provide
the other with such tax information, reports, returns or schedules as may be
reasonably required to assist the other in so reporting the transactions
contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery, or by
facsimile AND overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Contributor or Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
<PAGE>
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this Agreement,
whether or not such transactions are consummated. Without limiting the
generality of the foregoing and whether or not such liabilities may be deemed to
have been incurred in the ordinary course of business, Pentegra shall not be
liable to or required to pay, either directly or indirectly, any fees and
expenses of legal counsel, accountants, auditors or other persons or entities
retained by Contributor or any Shareholder for services rendered in connection
with negotiating and closing the transactions contemplated by this Agreement or
the documents to be executed in connection herewith, whether or not such costs
or expenses are incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure, either
written or oral, regarding the transactions contemplated by this Agreement
without the prior written consent of the other party, provided that the
foregoing shall not prohibit any disclosure (a) by press release, filing or
otherwise that Pentegra has determined in good faith judgment to be required by
Federal securities laws or the rules of the National Association of Securities
Dealers, (b) to attorneys, accountants, investment bankers or other agents of
the parties assisting the parties in connection with the transactions
contemplated by this Agreement, and (c) by Pentegra in connection with the
conduct of its Initial Public Offering and conducting an examination of the
operations and assets of Contributor.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA AND APPLIED WITHOUT
GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are
integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and not
only in connection with the specific representation in which they are explicitly
referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS
ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY
AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR
ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one and the same
instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or
<PAGE>
have any right under or by virtue of this Agreement. No party may assign any
right or obligation hereunder without the prior written consent of the other
parties; provided, however, that Pentegra may assign its rights and delegate
its obligations hereunder to any entity that is an affiliate of Pentegra.
For purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Contributor, be relieved from its
obligations to Contributor under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Contributor, on the other hand, file suit in any court against any
other party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at
Closing a pro rata portion of all taxes levied upon the Assets for the
calendar year in which the Closing occurs. Such taxes shall be estimated,
apportioned and pro-rated among Contributor and Pentegra as of the Closing
Date, and the prorated amount due Pentegra shall be credited to the cash
portion of the Purchase Consideration. Upon payment by Pentegra of such
taxes actually assessed and paid on the Assets, Pentegra shall calculate the
apportionment of such taxes and shall pay Contributor or may demand from
Contributor, and Contributor agrees to pay, the amount necessary to correct
the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing, and
signed by the parties hereto. The waiver of any of the terms and conditions of
this Agreement shall not be construed as a waiver of any other terms and
conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Contributors or Shareholders (hereinafter referred to as a "Party"), whether
made before or after the institution of any legal proceeding, any dispute among
the parties hereto in any way arising out of, related to, or in connection with
this Agreement (hereinafter a "Dispute"), shall be resolved by binding
arbitration in accordance with the terms of this Section (hereinafter the
"Arbitration Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in accordance
with the terms of this Arbitration Program, the Commercial Arbitration Rules of
the AAA. In the event of any inconsistency between this Arbitration Program and
those rules or statutes, then the terms of this Arbitration Program shall
control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been completed
and the arbitrators have determined each party's post-arbitration obligations
and responsibilities as it relates to such warranties and covenants. No
provision of, nor the exercise of any rights under, this Arbitration Program
shall limit the right of any Party at any time to seek or use ancillary or
preliminary judicial or non-judicial self help remedies for the purposes of
obtaining, perfecting, preserving, or foreclosing upon any personal property in
which there has been granted a security interest or lien by a Party in the
Documents. In Disputes involving indebtedness or other monetary obligations,
each Party agrees that the other Party may proceed against all liable persons,
jointly and severally against one or more of them, without impairing rights
against other liable persons. Nor shall a Party be required to join the
principal obligor or any other liable persons (e.g., sureties or guarantors) in
any proceeding against a particular person. A Party may release or settle
<PAGE>
with one or more liable persons as the Party deems fit without releasing or
impairing rights to proceed against any persons not so released. All
statutes of limitation that would otherwise be applicable shall apply to any
arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing, of
that Party's desire to arbitrate a dispute; and each Party shall, within twenty
(20) days from the date such notification is received, select an arbitrator, and
those two arbitrators shall select a third arbitrator within ten (10) days
thereafter. The issues or claims in dispute shall be committed to writing,
separately stated and numbered, and each party's proposed answers or contentions
shall be signed below the questions. Failure by a party to select an arbitrator
within the prescribed time period shall serve as that Party's acquiescence and
acceptance of the other party's selection of arbitrator. The arbitrators shall
resolve all Disputes in accordance with the applicable substantive law. Any
Dispute shall be decided by a majority vote of three arbitrators, unless the
claim or amount in controversy does not exceed $100,000.00, in which case a
single arbitrator (who shall have authority to render a maximum award of
$100,000.00, including all damages of any kind, costs and fees) may decide the
Dispute. The arbitrators may grant any remedy or relief that the arbitrators
deem just and equitable and within the scope of this Arbitration Program. The
arbitrators may also grant such ancillary relief as is necessary to make
effective the award. In all arbitration proceedings the arbitrators shall make
specific and written findings of fact and conclusions of law. In all
arbitration proceedings in which the amount in controversy exceeds $100,000.00,
in the aggregate, the Parties shall have in addition to the statutory right to
seek vacation or modification of any award pursuant to applicable law, the right
to seek vacation or modification of any award that is based in whole, or in
part, on an incorrect or erroneous ruling of law by appeal to an appropriate
court having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must be
filed in a court having jurisdiction over the Dispute within 15 days from the
date the award in rendered. The arbitrators' findings of fact shall be binding
on all Parties and shall not be subject to further review except as otherwise
allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in writing
by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the
headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this
Arbitration Program shall survive any termination, amendment, or expiration of
the Documents, unless the Parties otherwise expressly agree in writing making
specific reference to this Arbitration Program. To the extent permitted by
applicable law, the arbitrator shall have the power to award recovery of all
costs and fees (including attorney's fees, administrative fees, and arbitrators'
fees) to the prevailing Party. This Arbitration Program may be amended,
changed, or modified only by a writing which specifically refers to this
Arbitration Program and which is signed by all the Parties. If any term,
covenant, condition or provision of the Arbitration Program is found to be
unlawful or invalid or unenforceable, such illegality or invalidity or
unenforceable shall not affect the legality, validity or enforceability of the
remaining parts of this Arbitration Program, and all such remaining parts hereof
shall be valid and enforceable and have full force and effect as if the illegal,
invalid or unenforceable part had not been included. Each Party agrees to keep
all Disputes and arbitration proceedings strictly confidential, except for
disclosures of information required in the ordinary course of business of the
Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be found
to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect. In lieu of such
provision, there shall be added automatically as part of this Agreement, a
provision as similar in its terms to such provision as may be possible and be
legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
JAMES W. MEDLOCK, D.D.S., P.A.
By: /s/ James W. Medlock, D.D.S.
---------------------------------------
James W. Medlock, DDS, President
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
---------------------------------------
Its: Senior VP
---------------------------------------
/s/ James Medlock, D.D.S.
---------------------------------------
James Medlock, D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- ------------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment
Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
JAMES RANDY MELLARD, D.D.S., M.S., P.C.
AND
JAMES RANDY MELLARD, D.D.S., M.S.
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. TERMS OF THE REORGANIZATION
1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . 2
1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . 4
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . 9
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . 12
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . 13
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 13
Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . 13
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 14
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . 14
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . 14
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . 14
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . 14
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . 14
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . 14
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . 14
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . 14
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . 14
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . 15
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 15
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . 15
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . 15
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . 15
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . 16
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . 17
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . 17
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . 18
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . 19
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . 20
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . 20
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . 21
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . 22
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . 22
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . 22
14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . 22
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . 22
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . 23
14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . 23
14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . 23
14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and
executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra"), James Randy Mellard, D.D.S., M.S., P.C.
("Company") and James Randy Mellard, D.D.S., M.S. shareholders of Company
(referred to herein as "Shareholder" or "Shareholders").
WITNESSETH:
WHEREAS, Company operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, the Boards of Directors of the Company and Pentegra have
determined that a reorganization between each of them is in the best interests
of their respective companies;
WHEREAS, Pentegra or its affiliated designee has entered into or intends to
enter into Agreements and Plans of Reorganization, Asset Contribution Agreements
and other acquisition agreements (collectively, the "Other Agreements") with
such persons or entities or the stockholders of such entities listed on EXHIBIT
A (together with Company, the "Target Companies") and simultaneously with the
closing of the reorganization contemplated herein, intends to consummate its
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock");
WHEREAS, it is intended for Federal income tax purposes that the
reorganization contemplated by this Agreement shall qualify as an reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE REORGANIZATION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock
is consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".
1.2 MERGER. Subject to and upon the terms and conditions contained
herein, on the Closing Date, the Company shall be merged with and into Pentegra
(or its designated affiliate, in which case, the references herein to Pentegra
shall be to such designated affiliate and its shares of common stock) in
accordance with this Agreement and the separate corporate existence of the
Company shall thereupon cease ("Merger"). Pentegra shall be the surviving
corporation in the Merger ("Surviving Corporation") and shall continue to be
governed by the laws of the State of Delaware and the separate corporate
existence of
<PAGE>
Pentegra with all rights, privileges, powers, immunities and purposes shall
continue unaffected by the Merger. The Merger shall have the effects
specified in the Delaware General Corporation Law and the Business
Corporation Law. If all the conditions to the Merger set forth herein shall
have been fulfilled or waived in accordance herewith and this Agreement shall
not have been terminated in accordance herewith, the parties hereto shall
cause to be properly executed and filed on the Closing Date Certificates of
Merger for the Company meeting the applicable legal requirements. The
Mergers shall become effective on the Closing Date or the filing of such
documents, in accordance with applicable law, or at such later time as the
parties hereto have agreed upon and designated in such merger filings.
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of
Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation
and Bylaws of the Surviving Corporation until duly amended in accordance with
their terms.
1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra
immediately prior to the effective date of the Merger shall be the directors of
the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
Bylaws. The persons who are officers of Pentegra immediately prior to the
effective date of the Merger shall be the officers of the Surviving Corporation
and shall hold their respective offices until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal.
1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and
without any action on the part of the holder thereof, all shares of the
Company's common stock issued and outstanding on the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired and
shall cease to exist, and each holder of a certificate of representing shares of
Company common stock shall thereafter cease to have any rights with respect to
such shares except the right to receive the consideration set forth on ANNEX I
attached hereto (the "Merger Consideration"). Each share of common stock of
the Company held in treasury at the effective date of the Merger shall cease to
be outstanding and shall be cancelled and retired without payment of any
consideration therefor. On the effective date of the Merger, each share of
Pentegra Common Stock issued and outstanding shall, by virtue of he Mergers, and
without any action on the part of the holder thereof, continue unchanged and
remain outstanding as a share of validly issued, fully paid and nonassessable
share of Surviving Corporation common stock.
1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger,
the Shareholders, as the holders of a certificate or certificates representing
shares of Company common stock shall, upon surrender of such certificate or
certificates, receive the Merger Consideration, and until the certificate or
certificates of Company common stock shall have been surrendered by the
Shareholder and replaced by a certificate or certificates representing Pentegra
Common Stock (as set forth on ANNEX I), the certificate or certificates of
Company common stock shall, for all purposes be deemed to evidence ownership of
the number of shares of Pentegra Common Stock determined in accordance with the
provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the
Shareholders in the Merger shall be deemed for all purposes to have been issued
by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at
Closing the certificate or certificates representing the Company common stock
owned by them, duly endorsed in blank by the Shareholders, or accompanied by
duly executed blank stock powers, and with all necessary transfer tax and other
revenue stamps, acquired at the Shareholder's expense, affixed and cancelled.
1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in
<PAGE>
this Agreement, the Company and Shareholders shall execute and deliver all
such deeds, bills of sale, assignments and assurances and take and do all
such other actions and things as may be necessary or desirable to vest,
perfect or confirm any and all right, title and interest in, to and under the
Assets in Pentegra or otherwise to carry out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional
corporation or association, as applicable, duly organized, validly existing and
in good standing under the laws of the State of Texas. Company has all
necessary corporate powers to own all of its assets and to carry on its business
as such business is now being conducted. Company does not own stock in or
control, directly or indirectly, any other corporation, association or business
organization, nor is Company a party to any joint venture or partnership. The
Shareholders are the sole shareholders of Company and own all outstanding shares
of capital stock free of all security interests, claims, encumbrances and liens
in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock
has been legally and validly issued and fully paid and nonassessable. No shares
of capital stock of Company are owned by Company in treasury. There are no
outstanding (a) bonds, debentures, notes or other obligations the holders of
which have the right to vote with the stockholders of Company on any matter, (b)
securities of Company convertible into equity interests in Company, or (c)
commitments, options, rights or warrants to issue any such equity interests in
Company, to issue securities of Company convertible into such equity interests,
or to redeem any securities of Company. No shares of capital stock of Company
have been issued or disposed of in violation of the preemptive rights, rights of
first refusal or similar rights of any of Company's stockholders. Company is
not required to qualify to do business as a foreign corporation in any other
state or jurisdiction by reason of its business, properties or activities in or
relating to such other state or jurisdiction. Company does not have any assets,
employees or offices in any state other than the state set forth in the first
sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power
to execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all action required by
law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to
authorize the execution, delivery and performance of this Agreement and such
related documents. Each Shareholder has the legal capacity to enter into and
perform this Agreement and the other agreements to be executed and delivered in
connection herewith. Company has obtained the approval of its stockholders
necessary to the consummation of the transactions contemplated herein. This
Agreement and all agreements and documents executed and delivered in connection
herewith have been, or will be as of the Closing Date, duly executed and
delivered by Company and Shareholders, as appropriate, and constitute or will
constitute the legal, valid and binding obligations of Company and Shareholders,
enforceable against Company and Shareholders in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of consents
described on EXHIBIT 2.4, the consummation of the actions contemplated hereby
will not, violate any provision of the Articles or Certificate of Incorporation
or Bylaws of Company or any provisions of, or result in the acceleration of, any
obligation under any mortgage, lien, lease, agreement, rent, instrument, order,
arbitration award, judgment or decree to which Company or any Shareholder is a
party or by which Company or any Shareholder is bound, or violate any material
restrictions of any kind to which Company is subject, or result in any lien or
encumbrance on any of Company's assets or the Assets.
<PAGE>
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All material
building or other permits, certificates of occupancy, concessions, grants,
franchises, licenses, certificates of need and other governmental authorizations
and approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect and
are described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Company and Shareholders, threatened, which may result in the
revocation, cancellation or suspension, or any adverse modification, of any such
licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Company or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been declared or paid by Company on any of its capital stock
since the Balance Sheet Date. No repurchase of any of Company's capital stock
has been approved, effected or is pending, or is contemplated by Company.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Company and all amendments
thereto have been delivered to Pentegra. The minute books of Company contain
accurate minutes of all meetings of and consents to actions taken without
meetings of the Board of Directors and stockholders of Company since its
formation. The books of account of Company have been kept accurately in the
ordinary course of business and the revenues, expenses, assets and liabilities
of Company have been properly recorded in such books.
2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any related
unaudited statements of income, retained earnings, schedule of accounts
receivable, accounts payable and accrued liabilities, and cash flows for the
twelve months then ended (collectively, with the related notes thereto, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and results of operations of Company as of the dates and for the
periods indicated and reflect all fixed and contingent liabilities of Company.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Company or any Shareholder leases, as lessor or lessee, real
or personal property used in operating the Business, related to the Assets or
otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in
accordance with their respective terms, and there is not under any such lease
any existing default by Company, as lessor or lessee, or any condition or event
of which any Shareholder or Company has knowledge which with notice or lapse of
time, or both, would constitute a default, in respect of which Company or
Shareholders have not taken adequate steps to cure such default or to prevent a
default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Company and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for
<PAGE>
those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Company
shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those
encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior
to the Closing Date and evidence of such releases of liens and claims shall
be provided to Pentegra on the Closing Date and the Assets shall not be used
to satisfy such liens, claims or encumbrances. Pentegra acknowledges that it
has acquired the assets "where and as is" relying solely upon Pentegra's own
examination.
2.11 INVENTORIES. All of the Assets constituting inventory are owned or
used by Company, are in good, current, standard and merchantable condition and
are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Company has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Company, including the names of any entities from whom Company previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Company in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Company has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on
EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this
Agreement of: (a) the name of each director and officer of Company and the
offices held by each, (b) the most recent payroll report of Company, showing all
current employees of Company and their current levels of compensation, (c)
promised increases in compensation of employees of Company that have not yet
been effected, (d) oral or written employment agreements, consulting agreements
or independent contractor agreements (and all amendments thereto) to which
Company is a party, copies of which have been delivered to Pentegra, and (e) all
employee manuals, materials, policies, procedures and work-related rules, copies
of which have been delivered to Pentegra. Company is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Company has not engaged in any unfair labor practice.
There are no unfair labor practices charges or complaints pending or threatened
against Company, and Company has never been a party to any agreement with any
union, labor organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Except as set forth on Exhibit 2.16, neither any
Shareholder, Company nor the Business nor any of the Assets is subject to any
pending, nor does Company or any Shareholder have knowledge of any threatened,
litigation, governmental investigation, condemnation or other proceeding against
or relating to or affecting Company, any Shareholder, the Business, the Assets
or the transactions contemplated by this Agreement, and, to the knowledge of
Company and Shareholders, no basis for any such action exists, nor is there any
legal impediment of which Company or any Shareholder has knowledge to the
continued operation of its business or the use of the Assets in the ordinary
course, subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Company has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts, obligations
and commitments of Company ("Contracts"), entered
<PAGE>
into in connection with and related to the Assets or the Business, all of
which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of
leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15
(in the case of Contracts other than leases) attached hereto. Except as
otherwise indicated on such Exhibits, all of such Contracts are valid,
binding and enforceable in accordance with their terms and are in full force
and effect, and no defenses, offsets or counterclaims have been asserted or
may be made by any party thereto. Except as indicated on such Exhibits,
there is not under any such Contract any existing default by Company or any
Shareholder, or any condition or event of which Company or any Shareholder
has knowledge which with notice or lapse of time, or both, would constitute a
default. Company and Shareholders have no knowledge of any default by any
other party to such Contracts. Company and Shareholders have not received
notice of the intention of any party to any Contract to cancel or terminate
any Contract and have no reason to believe that any amendment or change to
any Contract is contemplated by any party thereto. Other than those
contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13
and EXHIBIT 2.15, Company are not a party to any material written or oral
agreement contract, lease or arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product or
service;
(h) Loan agreement or other contract for money borrowed or lent or to
be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of the
Company or Shareholders, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Company on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) or entered into any contract, lease, license or
commitment, except in connection with the performance of this Agreement, other
than in the course of business;
<PAGE>
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued, contingent
or otherwise) other than (i) liabilities shown or reflected on the Balance
Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary
course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(d) Made any payments to or loaned any money to any person or entity
other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have been
required due to income or operations of Company since the Balance Sheet Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants or
agents, or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of any officer, employee, consultant or agent;
(j) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties, assets
or business or the Business or the Assets, or experienced any other material
adverse change in its financial condition, assets, prospects, liabilities or
business;
(n) Declared or paid a distribution, payment or dividend of any kind
on the capital stock of Company;
(o) Repurchased, approved any repurchase or agreed to repurchase any
of Company's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Company has filed all tax returns (including tax reports
and other statements)
<PAGE>
required to have been filed by it or have been properly extended, and has
paid all taxes (including any interest, penalty or additions thereto)
required to have been paid by it. All such tax returns are complete and
accurate in all respects and properly reflect the relevant taxes for the
periods covered thereby. Company has not received any notice that any tax
deficiency or delinquency has been or may be asserted against Company.
There are no audits relating to taxes of Company pending or in process or, to
the knowledge of Company, threatened. Company is not currently the
beneficiary of any waiver of any statute of limitations in respect of taxes
nor of any extension of time within which to file any tax return or to pay
any tax assessment or deficiency. There are no liens or encumbrances
relating to taxes on or threatened against any of the assets of Company.
Company has withheld and paid all taxes required by law to have been withheld
and paid by it. Neither Company nor any predecessor of Company is or has
been a party to any tax allocation or sharing agreement or a member of an
affiliated group of corporations filing a consolidated Federal income tax
return. Company has delivered to Pentegra correct and complete copies of
Company's three most recently filed annual state, local and Federal income
tax returns, together with all examination reports and statements of
deficiencies assessed against or agreed to by Company during the three
calendar year period preceding the date of this Agreement. Company has
neither made any payments, is obligated to make any payments, or is a party
to any agreement that under any circumstance could obligate it to make any
payments that will not be deductible under Code section 280G.
(b) No Shareholder presently intends to dispose of any of the shares of
Pentegra Common Stock to be received hereunder nor is a party to any plan,
arrangement or agreement for the disposition of such shares. Company and
Shareholders have no knowledge, after due inquiry, of any such intent, plan,
arrangement or agreement by any Shareholder. Nothing contained herein shall
prohibit Shareholders from selling such shares of Pentegra Common Stock after
the designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated by
this Agreement which may be now or hereafter asserted against Pentegra, Company
or Company's shareholders resulting from any action taken by Company or any
Shareholder or their respective agents or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against
on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and
has not incurred since that date and will not have incurred as of the Closing
Date, any material liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, other than
those incurred in the ordinary course of business or as set forth on EXHIBIT
2.16. Company and Shareholders do not know, or have reasonable grounds to know,
of any basis for the assertion against Company or any Shareholder as of the
Balance Sheet Date, of any claim or liability of any nature in any amount not
fully reflected or reserved against on the Balance Sheet, or of any claim or
liability of any nature arising since that date other than those incurred in the
ordinary course of business or contemplated by this Agreement. All indebtedness
of Company (including without limitation, indebtedness for borrowed money,
guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached
hereto.
2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed
professional of Company carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the industry.
Valid and enforceable policies in such amounts are outstanding and duly in force
and will remain duly in force through the Closing Date. All such policies are
described in EXHIBIT 2.20 attached hereto and true and correct copies have been
delivered to Pentegra. Neither Shareholders nor Company have not received
notice or other communication from the issuer of any such insurance policy
cancelling or amending such policy or threatening to do so. Neither Company,
nor any Shareholder nor any licensed professional employee of Company has any
outstanding claims, settlements or premiums owed against any insurance policy.
<PAGE>
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached
hereto, Company has neither established, nor maintains, nor is obligated to make
contributions to or under or otherwise participate in, (a) any bonus or other
type of compensation or employment plan, program, agreement, policy, commitment,
contract or arrangement (whether or not set forth in a written document); (b)
any pension, profit-sharing, retirement or other plan, program or arrangement;
or (c) any other employee benefit plan, fund or program, including, but not
limited to, those described in SECTION 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT
2.20 (individually "Company Plan," and collectively "Company Plans") have been
operated and administered in all material respects in accordance with all
applicable laws, rules and regulations, including without limitation, ERISA, the
Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of
1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination
in Employment Act of 1967, as amended, and the related rules and regulations
adopted by those Federal agencies responsible for the administration of such
laws. To the best of the Company's knowledge, no act or failure to act by
Company has resulted in a "prohibited transaction" (as defined in ERISA) with
respect to the Company Plans. No "reportable event" (as defined in ERISA) has
occurred with respect to any of the Company Plans. Company has not previously
made, is not currently making, and is not obligated in any way to make, any
contributions to any multiemployer plan within the meaning of the Multi-Employer
Pension Plan Amendments Act of 1980. With respect to each Company Plan, either
(i) the value of plan assets (including commitments under insurance contracts)
is at least equal to the value of plan liabilities or (ii) the value of plan
liabilities in excess of plan assets is disclosed on the Balance Sheet, all as
of the Closing Date.
2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing
Date, a party to any agreement or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree, rule or
regulation that materially and adversely affects the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Company,
the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's
licensed professional employees, and the conduct of the Business and use of the
Assets, have complied with all applicable laws, rules, regulations and licensing
requirements, including, without limitation, the Federal Environmental
Protection Act, the Occupational Safety and Health Act, the Americans with
Disabilities Act and any environmental laws and medical waste laws, and there
exist no violations by Company, any Shareholder or any licensed professional
employee of Company of any Federal, state or local law or regulation. Company
and Shareholders have not received any notice of a violation of any Federal,
state and local laws, regulations and ordinances relating to the operations of
the Business and Assets and no notice of any pending inspection or violation of
any such law, regulation or ordinance has been received by Company.
2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed
professional employee or independent contractor of Company has timely filed all
claims or other reports required to be filed with respect to the purchase of
services by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are no
pending appeals, overpayment determinations, adjustments, challenges, audit,
litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Company, any Shareholder
and each licensed professional employee of Company. Neither Company, nor any
Shareholder, nor any licensed professional employee of Company has been
convicted of, or pled guilty or nolo contendere to, patient abuse or negligence,
or any other Medicare or Medicaid program related offense and none has committed
any offense which may serve as the basis for suspension or exclusion from the
Medicare and Medicaid programs or any other third party payor program. With
respect to payors, Company, Shareholders and Company's licensed professional
employees have not (a) knowingly and willfully making
<PAGE>
or causing to be made a false statement or representation of a material fact
in any application for any benefit or payment; (b) knowingly and willfully
making or causing to be made any false statement or representation of a
material fact for use in determining rights to any benefit or payment; (c)
failed to disclose knowledge of the occurrence of any event affecting the
initial or continued right to any benefit or payment on its own behalf or on
behalf of another, with the intent to fraudulently secure such benefit or
payment; and (d) violated any applicable state anti-remuneration or
self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company
or Shareholders in this Agreement, and no Exhibit or certificate issued or
executed by, or information furnished by, officers or directors of Company or
any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or
in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements or facts contained therein not
misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Company has with any bank or other
financial institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Company (or their respective spouses,
children or affiliates) owns directly or indirectly, on an individual or joint
basis, any interest in, has a compensation or other financial arrangement with,
or serves as an officer or director of, any customer or supplier or competitor
of Company or any organization that has a material contract or arrangement with
Company.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of
the names and addresses of each payor of Company's services which accounted for
more than 10% of revenues of Company in the preceding fiscal year. Company has
good relations with all such payors and other material payors of Company and
none of such payors has notified Company that it intends to discontinue its
relationship with Company or to deny any claims submitted to such payor for
payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Company and Shareholders as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions required
by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize
the execution, delivery and performance of this Agreement and such related
documents. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing Date,
duly executed and delivered by Pentegra and constitute or will constitute the
legal, valid and binding obligations of Pentegra, enforceable against Pentegra
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and delivery
of this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and, the
consummation of the actions contemplated hereby will not, violate any provision
of the Certificate of
<PAGE>
Incorporation or Bylaws of Pentegra or any provisions of, or result in the
acceleration of, any obligation under any mortgage, lien, lease, agreement,
rent, instrument, order, arbitration award, judgment or decree to which
Pentegra is a party or by which Pentegra is bound, or violate any material
restrictions of any kind to which Pentegra is subject, or result in any lien
or encumbrance on any of Pentegra's assets. Other than as have been obtained
or as would not have a material adverse effect, there are no consents of any
person or entity required for the transaction contemplated hereby on behalf
of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Pentegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would not
have a material adverse effect, there are no proceedings pending or, to the
knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses or
permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any pending,
nor does Pentegra have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Pentegra, its business, assets or the transactions contemplated by
this Agreement, and, to the knowledge of Pentegra, no basis for any such action
exists, nor is there any legal impediment of which Pentegra has knowledge to the
continued operation of its business or the use of its Assets in the ordinary
course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports and
other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it, other than as would not have a material adverse effect. Pentegra
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Pentegra. There are no audits relating to taxes of
Pentegra pending or in process or, to the knowledge of Pentegra, threatened.
Pentegra is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the reorganization contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the reorganization contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra
in this Agreement, and no Exhibit or certificate issued by officers or directors
of Pentegra and furnished or to be furnished to Company or any Shareholder
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, agree that between the
date hereof and the Closing Date:
<PAGE>
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall
use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Company and
Shareholders agree to complete the Exhibits hereto to be provided by them in
form and substance satisfactory to both Company and Pentegra.
4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the
Business and use the Assets in the ordinary course. Company and Shareholders
shall not enter into any lease, contract, indebtedness, commitment, purchase or
sale or acquire or dispose of any capital asset relating to the Business or the
Assets except in the ordinary course of business. Company and Shareholders
shall use their best efforts to preserve the Business and Assets intact and
shall not take any action that would have an adverse effect on the Business or
Assets. Company and Shareholders shall use their best efforts to preserve
intact the relationships with payors, customers, suppliers, patients and others
having significant business relations with Company. Company and Shareholders
shall collect its receivables and pay its trade payables in the ordinary course
of business. Company and Shareholder shall not introduce any new method of
management, operations or accounting.
4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and
its authorized representatives access to, and make available for inspection, all
of the assets and business of Company, the Business and the Assets, including
employees, customers and suppliers and permit Pentegra and its authorized
representatives to inspect and make copies of all documents, records and
information with respect to the business or assets of Company, the Business or
the Assets as Pentegra or its representatives may request. Company and
Shareholders shall promptly notify Pentegra in writing of (a) any notice or
communication relating to a default or event that, with notice or lapse of time
or both, could become a default, under any contract, commitment or obligation to
which Company is a party or relating to the Business or the Assets, and (b) any
adverse change in Company's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and
Shareholders shall use their best efforts to secure all necessary approvals and
consents of third parties to the consummation of the transactions contemplated
hereby, including consents described on EXHIBIT 2.4. Company and Shareholders
shall use their best efforts to obtain all licenses, permits, approvals or other
authorizations required under any law, rule, regulation, or otherwise to provide
the services of the Practice contemplated by the Service Agreement and to
conduct the intended business of the Practice and operate the Business and use
the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of Closing or the termination of this Agreement in accordance with the
provisions hereof, Company and Shareholders shall not, and shall use its best
efforts to cause Company's employees, agents and representatives not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer, including without limitation,
any proposal or offer to any Shareholder, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of Company or engage
in any negotiations concerning, or provide any confidential information or data
to, or have any discussions with, any person relating to such proposal or offer,
and Company and Shareholders will immediately cease any such activities,
discussions or negotiations heretofore conducted with respect to any of the
foregoing. Company and Shareholders shall immediately notify Pentegra if any
such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund completely
for any accrued benefits, where applicable, or vested accrued benefits for which
Company or any entity might have any liability whatsoever arising from any
insurance, pension plan, employment tax or similar liability of Company to any
employee or other person or entity (including, without limitation, any Company
Plan and any liability under
<PAGE>
employment contracts with Company) allocable to services performed prior to
the Closing Date. Company and Shareholders acknowledge that the purpose and
intent of this covenant is to assure that Pentegra shall have no unfunded
liability whatsoever at any time after the Closing Date with respect to any
of Company's employees or similar persons or entities, including, without
limitation, any Company Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Company shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of any Shareholder (other than in the ordinary course of business) or other
employee or an independent contractor of Company, adopt, amend or terminate any
compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect upon Company, its business, assets or
prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Company, nor will any repurchase of any
of Company's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall
use their best efforts to take, or cause to be taken, all actions necessary to
effect the reorganization contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change
in any material respect the tax or financial accounting methods or practices
followed by Company (including any material change in any assumption underlying,
or any method of calculating, any bad debt, contingency or other reserve),
except as may be required by law or generally accepted accounting principles.
Company and Shareholders will duly, accurately and timely (without regard to any
extensions of time) file all returns, information statements and other documents
relating to taxes of Company required to be filed by it, and pay all taxes
required to be paid by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Company hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Company and Shareholders covenant and agree that all of the
creditors with respect to the Business and the Assets will be paid in full by
Company prior to the Closing Date, except to extent that any liability to such
creditors is assumed by Pentegra pursuant to this Agreement. If required by
Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment
of all creditors with respect to the Business and the Assets. Notwithstanding
the foregoing, Company and Shareholders may dispute the validity or amount of
any such creditor's claim without being deemed to be in violation of this
SECTION 4.11, provided that such dispute is in good faith and does not
unreasonably delay the resolution of the claim and provided, further that
Company and Shareholders agree to indemnify and bond Pentegra for such amounts
as is satisfactory to Pentegra.
4.12 LEASE. If Company leases any of its premises from any Shareholder or
other affiliate of Company or any shareholder of Company, Pentegra shall have
entered into a building lease (the "Building Lease") with the owner of such
premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, (i) a five year initial
term plus three five-year renewal options, (ii) a lease rate equal to the fair
market value lease rate, as agreed to by Pentegra, and (iii) such other
provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with
all requests made
<PAGE>
by Pentegra for the purpose of allowing Pentegra to hire those non-dentist
employees of Company employed by the Company as of the Closing Date, with
such employment to be effective as of the Closing Date. Notwithstanding the
above, Company and Shareholders shall remain liable under any Company Plans
for any claims incurred by any employees or their spouses or dependents, and
for all compensation, bonuses, benefits and other such items and other
liabilities related to Company's employees incurred by Company prior to the
Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all
employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be
treated as "leased employees" (as defined in Code Section 414(n)) of Company and
shall be treated as Clinic employees for purposes of eligibility and
participation in Company Plans.
4.15 INSURANCE. Company shall agree to have and shall assist Pentegra and
its affiliates to be named as an additional insured on its liability insurance
programs, effective as of the Closing Date.
4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a
limited liability company, partnership or other legal entity (the "Practice")
for the purpose of practicing dentistry and entering into the Service Agreement.
The Practice shall be duly organized, in existing and in good standing under the
laws of the State in which the practice of dentistry is conducted by the
Shareholders and the Practice. The Practice shall have all necessary power to
own all of its assets and to carry on its business as such business is now being
conducted. The Shareholders shall be the sole member/shareholder/partner of the
Practice and own all such interests free of all security interests, claims,
encumbrances and liens. Each interest in the Practice shall be legally and
validly issued and fully paid and nonassessable. There shall be no outstanding
(a) bonds, debentures, notes or other obligations the holders of which have the
right to vote with the members/partners/shareholders of the Practice on any
matter, (b) securities of the Practice convertible into equity interests in the
Practice, or (c) commitments, options, rights or warrants to issue any such
equity interests in the Practice, to issue securities of the Practice
convertible into such equity interests, or to redeem any securities of the
Practice. No interests of the Practice shall have been issued or disposed of in
violation of the preemptive rights, rights of first refusal or similar rights of
any of the Practice's members/partners/shareholders. The Practice shall quality
to do business as a foreign entity in any other state or jurisdiction by reason
of its business, properties or activities in or relating to such other state or
jurisdiction. The Company shall have transferred the Excluded Assets set
forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to
assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for equity
interest in the Practice, and the Company shall have distributed such equity
interests in the Practice to the Shareholders.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations
and minutes of the Practice and all amendments thereto of the Practice shall
have been delivered to Pentegra. The minute books of the Practice shall contain
all accurate minutes of the meetings of and consents to actions taken without
meetings of the members\managers/partners/board of directors of the Practice
since its formation. The books of account of the Practice shall have been kept
accurately in the ordinary course of business and the revenues, expenses, assets
and liabilities of the Practice shall have been properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements and
other documents to be executed and delivered by it pursuant to this Agreement,
including without limitation, the Service Agreement and each Employment
Agreement to be executed and delivered on the Closing Date, and has taken all
action required by law, its Organization/Partnership Agreement/Articles of
Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution,
delivery and performance of such documents. The Service Agreement, the
Employment Agreement and the other agreements contemplated hereby shall have
been duly executed and
<PAGE>
delivered by the Practice on the Closing Date and constitute or will
constitute the legal, valid and binding obligations of the Practice
enforceable against the Practice in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of the Service Agreement, the
Employment Agreements and the other agreements contemplated hereby will not
violate any provision of the organizational documents of the Practice or any
provisions of, or result in the acceleration of, any obligation under any
mortgage, lien, lease, agreement, rent, instrument, order, arbitration award,
judgment or decree to which the Practice is a party or by which the Practice
is bound, or violate any material restrictions of any kind to which the
Practice is subject, or result in any lien or encumbrance on any of the
Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and have filed with the
proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra and Company agree to
complete the Exhibits hereto to be provided by both parties.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS.
Pentegra, Shareholders and Company agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall
cooperate to promptly prepare and file with the Securities Exchange Commission
("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to
be filed by Pentegra in connection with its Initial Public Offering (including
the prospectus constituting a part thereof, the "Registration Statement").
Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits
and approvals required to carry out the transactions contemplated by this
Agreement and the Company and Shareholders shall furnish all information
concerning Company and Shareholders as may be reasonable requested in connection
with any such action.
Company and Shareholder represent and warrant that none of the information
or documents supplied or to be supplied by it specifically for inclusion in the
Registration Statement, by exhibit or otherwise, will, at the time the
Registration Statement and each amendment or supplement thereto, if any, becomes
effective under the Securities Act of 1933, 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, in light of the circumstances under
which they were made, not misleading. Company and Shareholders shall be
entitled to review the Registration Statement and each amendment thereto, if
any, prior to the time each becomes
<PAGE>
effective under the Securities Act of 1933.
Company and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by Pentegra
in connection with the preparation of the Registration Statement and each
amendment or supplement thereto, or any other statement, filing, notice or
application made by or on behalf of each such party or any of its subsidiaries
to any governmental entity in connection with the transactions contemplated by
the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at or
prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Company and Shareholders contained herein shall have been true and correct in
all respects when initially made and shall be true and correct in all respects
as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Company and Shareholders prior to
the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Company shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Company, the Business and the Assets, the results of which shall
be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a mutually agreeable Service Agreement (the
"Service Agreement"), which may be in the form attached hereto as EXHIBIT 7.7,
and otherwise satisfactory to Company and Pentegra, pursuant to which Pentegra
will provide management services to the Practice. Each Shareholder shall have
executed and delivered a mutually agreeable Guaranty Agreement which may be in
the form attached as EXHIBIT 4.10, and otherwise satisfactory to Company and
Pentegra, of the Service Agreement pursuant to which Shareholder shall, among
other things, guaranty the obligations of the Practice under the Service
Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused
each shareholder of Company that has an existing employment agreement with
Company to have terminated his or her employment agreement with Company and
shall have executed a mutually agreeable employment agreement ("Employment
Agreement") with the Practice which may be in the form attached hereto as
EXHIBIT 7.8 and otherwise satisfactory to Company and Pentegra.
<PAGE>
7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained
all necessary government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly
executed in form satisfactory to Pentegra and its counsel, referred to in
SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or
payables between Company and its shareholders or affiliates and Company shall
not have any liabilities, including indebtedness, guaranties and capital leases,
that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an
additional insured on their liability insurance program in accordance with
SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Company since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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.
At or prior to the date that the Registration Statement is declared effective by
the SEC, Pentegra shall have received all state securities and "Blue Sky"
permits necessary to consummate the transactions contemplated hereby. The
Pentegra Common Stock shall have been approved for listing on Nasdaq or other
exchange selected by Pentegra, subject only to official notification of
issuance.
SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Company and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Pentegra contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Company shall have received all documents, duly
executed in form satisfactory to Company and its counsel, referred to in SECTION
9.2.
8.5 SECURITIES APPROVAL. 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.
At or prior to the date that the Registration Statement is declared effective by
the SEC, Pentegra shall have received all state securities and "Blue Sky"
permits necessary to consummate the transactions contemplated hereby. The
Pentegra Common Stock shall have been approved for listing on Nasdaq or other
exchange selected by
<PAGE>
Pentegra, subject only to official notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. On or before the Closing Date,
Company and Shareholders shall deliver to Pentegra the following, all of which
shall be in a form satisfactory to counsel to Pentegra and shall be held by
Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing,
pursuant to an escrow agreement or letter agreement in form and substance
mutually acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals of
all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of Company
authorizing the execution, delivery and performance of this Agreement, the
Service Agreement, the Employment Agreements and all related documents and
agreements each certified by the Secretary as being true and correct copies of
the original thereof;
(d) executed merger certificate and/or plan as required by applicable
state law;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra and the original stock certificates together
with blank stock powers representing the outstanding shares of Company common
stock;
(f) certificates of the Shareholders and a duly authorized officer of
Company dated as of the Closing Date, (i) as to the truth and correctness of the
representations and warranties of Company and Shareholder contained herein; (ii)
as to the performance of and compliance by Company and Shareholder with all
covenants contained herein; and (iii) certifying that all conditions precedent
of Company and Shareholders to the Closing have been satisfied;
(g) a certificate of the Secretary of Company certifying as to the
incumbency of the directors and officers of Company and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Company;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Company and any state of required
foreign qualification of Company establishing that Company is in existence and
is in good standing to transact business in its state of incorporation;
(i) an opinion of counsel to Company and Shareholder opining as to
the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Company, the enforceability of this Agreement and the other agreements and
documents to be executed in connection herewith, and other matters reasonably
requested by Pentegra;
(j) non-foreign affidavits executed by Company;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
<PAGE>
(l) an executed Registration Rights Agreement between Pentegra and
Company, in substantially the form attached hereto as EXHIBIT 9.1(L) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall
deliver to Company and Shareholders, the following, all of which shall be in a
form satisfactory to counsel to Company and Shareholders and shall be held by
Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing,
pursuant to an escrow agreement or letter agreement in form and substance
mutually acceptable to the parties hereto:
(a) the Merger Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance of
this Agreement and all related documents and agreements each certified by the
Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii) certifying
that all conditions precedent of Pentegra to the Closing have been satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and the
State of incorporation of Company;
(h) an opinion of counsel to Pentegra opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Pentegra, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Company;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Company to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
<PAGE>
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in
any Exhibit attached hereto, any agreement executed pursuant hereto, and any
certificate executed and delivered by any party pursuant to the terms of this
Agreement, shall constitute representations and warranties of Company and
Shareholders, jointly and severally, or of Pentegra, as the case may be. All
such representations and warranties, and all representations and warranties
expressly labeled as such in this Agreement shall survive the date of this
Agreement and the Closing Date for a period of five (5) years following the
Closing Date, except that (i) the representations and warranties with respect to
environmental and medical waste laws and health care laws and matters shall
survive for a period of fifteen (15) years and tax representations shall survive
until one year after the expiration of the applicable statute of limitations.
Each party covenants with the other parties not to make any claim with respect
to such representations and warranties, against any party after the date on
which such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless
such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4
hereof, as the case may be. Each party hereby releases, acquits and discharges
the other party from any and all claims and demands, actions and causes of
action, damages, costs, expenses and rights of setoff with respect to which the
notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely
provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD COMPANY AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS
AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR
PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN
"INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES,
LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING,
BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL)
ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY
PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF,
OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
(D) ANY LIABILITY OF PENTEGRA FOR COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEY'S FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION,
PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE
OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION
<PAGE>
HEREWITH,
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR
TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3
AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND
SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS,
DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND
EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH
RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER
THE CLOSING DATE,
(D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS
GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING
OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO
CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY
RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A
RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE
NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
<PAGE>
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND
PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS
SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION
STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR
SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED
OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS
SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the defense
of such action or proceeding, such Indemnified Person shall notify Indemnitor
thereof. If any such action or other proceeding shall be brought against any
Indemnified Person, Indemnitor shall, upon written notice given within a
reasonable time following receipt by Indemnitor of such notice from Indemnified
Person, be entitled to assume the defense of such action or proceeding with
counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person;
provided, however, that any Indemnified Person may at its own expense retain
separate counsel to participate in such defense. Notwithstanding the foregoing,
Indemnified Person shall have the right to employ separate counsel at
Indemnitor's expense and to control its own defense of such action or proceeding
if, in the reasonable opinion of counsel to such Indemnified Person, (a) there
are or may be legal defenses available to such Indemnified Person or to other
Indemnified Persons that are different from or additional to those available to
Indemnitor and which could not be adequately advanced by counsel chosen by
Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor
and such Indemnified Person that would make such separate representation
advisable; provided, however, that in no event shall Indemnitor be required to
pay fees and expenses hereunder for more than one firm of attorneys of
Indemnified Person in any jurisdiction in any one action or proceeding or group
of related actions or proceedings. Indemnitor shall not, without the prior
written consent of any Indemnified Person, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding to which such Indemnified Person is a party unless such settlement,
compromise or consent includes an unconditional release of such Indemnified
Person from all liability arising or potentially arising from or by reason of
such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Company or any Shareholder giving rise
to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be
entitled to offset the amount of damages incurred by it as a result of such
breach of warranty, representation, covenant or agreement against any amounts
payable by Pentegra, including the amounts payable under the Service Agreement.
<PAGE>
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Company
or any Shareholder contained in this Agreement or in any certificate or other
document executed and delivered by Company or any Shareholder pursuant to this
Agreement is or becomes untrue or breached in any material respect or if Company
or any Shareholder fails to comply in any material respect with any covenant or
agreement contained herein, and any such misrepresentation, noncompliance or
breach is not cured, waived or eliminated within twenty (20) days after receipt
of written notice thereof;
(c) at any time by Company or any Shareholder if any representation or
warranty of Pentegra contained in this Agreement or in any certificate or other
document executed and delivered by Pentegra pursuant to this Agreement is or
becomes untrue or breached in any material respect or if Pentegra fails to
comply in any material respect with any covenant or agreement contained herein
and such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra, Shareholders or Company if the transaction contemplated
hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Company, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date,
Shareholder shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of
Pentegra Common Stock received as consideration by such party hereunder, (ii)
any interest (including without limitation, an option to buy or sell) in any
shares of Pentegra Common Stock, received by any party hereunder as
consideration, in whole or in part, and no such attempted transfer shall be
treated as effective for any purpose or (b) engage in any transaction, whether
or not with respect to any shares of Pentegra Common Stock or any interest
therein, received by any party hereunder as consideration, the intent or effect
of which is to reduce the risk of owning shares of Pentegra Common Stock. The
certificates evidencing the Pentegra Common Stock delivered to Company pursuant
to the terms hereof will bear a legend substantially in the form set forth below
and containing such other information as Pentegra may deem necessary or
appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the
shares of Pentegra Common Stock to be delivered to Company pursuant to this
Agreement have not been and will not be registered under the Securities Act of
1933 and may not be resold without compliance with the Securities
<PAGE>
Act of 1933. The Pentegra Common Stock to be acquired by Shareholders
pursuant to this Agreement is being acquired solely for its own account, for
investment purposes only and with no present intention of distributing,
selling or otherwise disposing of it in connection with a distribution. Each
Shareholder covenants, warrants and represents that none of the shares of
Pentegra Common Stock issued to it will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the Securities Act, as
amended, and the rules and regulations of the Securities Exchange Commission
and applicable state securities laws and regulations. All certificates
evidencing shares of Pentegra Common Stock shall bear the following legend in
addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Company resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the
economic risk of an investment in Pentegra Common Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and
have such knowledge and experience in financial and business matters that they
are capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect their own interests in connection with
the acquisition of the Pentegra Common Stock. Shareholders and their
representatives have had an adequate opportunity to ask questions and receive
answers from the officers of Pentegra concerning any and all matters relating to
the background and experience of the officers and directors of Pentegra, the
plans for the operations of the business of Pentegra, and any plans for
additional acquisitions and the like. Shareholders and their representatives
have asked any and all questions in the nature described in the preceding
sentence and all questions have been answered to their satisfaction.
Shareholders are "accredited investor" as defined in Regulation D of the
Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is a valuable, special and unique asset of
Pentegra's businesses. Company and Shareholders agree that it will not disclose
such confidential information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, unless (i) such information
becomes available to or known by the public generally through no fault of
Company or Shareholders, (ii) disclosure is required by law or the order of any
governmental authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (ii), Company and Shareholders shall, if
possible, give prior written notice thereof to the other parties hereto, and
provide such other parties hereto with the opportunity to contest such
disclosure, (iii) Company and Shareholders reasonably believe that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party, or (iv) Company and Shareholders are the sole and exclusive
owner of such confidential information as a result of the transactions
contemplated hereunder or otherwise. In the event of a breach or threatened
breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra
shall be entitled to an injunction restraining Company and Shareholders from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting Pentegra from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
The obligations of the parties under this SECTION 13 shall survive the
termination of this Agreement.
Pentegra recognizes and acknowledges that it had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Company that is a valuable, special and unique
<PAGE>
asset of Company. Pentegra agrees that it will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, unless (i) such information becomes
available to or known by the public generally through no fault of Pentegra,
(ii) disclosure is required by law or the order of any governmental authority
under color of law, provided, that prior to disclosing any information
pursuant to this clause (ii), Pentegra shall, if possible, give prior written
notice thereof to the other parties hereto, and provide such other parties
hereto with the opportunity to contest such disclosure, (iii) Pentegra
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party, or (iv) Pentegra is the
sole and exclusive owner of such confidential information as a result of the
transaction contemplated hereunder or otherwise. In the event of a breach or
threatened breach by Pentegra of the provision of this SECTION 13, Company
shall be entitled to an injunction restraining Pentegra from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting Pentegra from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages. The
obligations of the parties under this SECTION 13 shall survive the
termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement will qualify as a reorganization within the meaning of Section
368(a) of the Code. The tax returns (and schedules thereto) of Shareholders,
Company and Pentegra shall be filed in a manner consistent with such intention
and Shareholders and Pentegra shall each provide the other with such tax
information, reports, returns or schedules as may be reasonably required to
assist the other in so reporting the transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery, or by
facsimile AND overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Company and Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
<PAGE>
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this Agreement,
whether or not such transactions are consummated. Without limiting the
generality of the foregoing and whether or not such liabilities may be deemed to
have been incurred in the ordinary course of business, Pentegra shall not be
liable to or required to pay, either directly or indirectly, any fees and
expenses of legal counsel, accountants, auditors or other persons or entities
retained by Company or any Shareholder for services rendered in connection with
negotiating and closing the transactions contemplated by this Agreement or the
documents to be executed in connection herewith, whether or not such costs or
expenses are incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure, either
written or oral, regarding the transactions contemplated by this Agreement
without the prior written consent of the other party, provided that the
foregoing shall not prohibit any disclosure (a) by press release, filing or
otherwise that Pentegra has determined in good faith judgment to be required by
Federal securities laws or the rules of the National Association of Securities
Dealers, (b) to attorneys, accountants, investment bankers or other agents of
the parties assisting the parties in connection with the transactions
contemplated by this Agreement, and (c) by Pentegra in connection with the
conduct of its Initial Public Offering and conducting an examination of the
operations and assets of Company.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF TEXAS AND
APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are
integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and not
only in connection with the specific representation in which they are explicitly
referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS
AND THE ESCROW LETTER ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE
PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN
THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which
<PAGE>
when so executed shall be deemed to be an original, and such counterparts
shall together constitute and be one and the same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any entity
that, through one or more intermediaries is, controlled, controlled by or under
common control with, Pentegra. Upon any such assignment prior to the Closing,
all references herein to Pentegra (including those to Pentegra Common Stock)
shall be deemed to include references to the assignee and the assignee's common
stock. Notwithstanding any such assignment, Pentegra shall not, absent a
written release from Company, be relieved from its obligations to Company under
this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Company, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Company and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Company or may demand from Company, and Company agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing, and
signed by the parties hereto. The waiver of any of the terms and conditions of
this Agreement shall not be construed as a waiver of any other terms and
conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the Company
or Shareholders (hereinafter referred to as a "Party"), whether made before or
after the institution of any legal proceeding, any dispute among the parties
hereto in any way arising out of, related to, or in connection with this
Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in
accordance with the terms of this Section (hereinafter the "Arbitration
Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in accordance
with the terms of this Arbitration Program, the Commercial Arbitration Rules of
the AAA. In the event of any inconsistency between this Arbitration Program and
those rules or statutes, then the terms of this Arbitration Program shall
control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been completed
and the arbitrators have determined each party's post-arbitration obligations
and responsibilities as it relates to such warranties and covenants. No
provision of, nor the exercise of any rights under, this Arbitration Program
shall limit the right of any Party at any time to seek or use ancillary or
<PAGE>
preliminary judicial or non-judicial self help remedies for the purposes of
obtaining, perfecting, preserving, or foreclosing upon any personal property in
which there has been granted a security interest or lien by a Party in the
Documents. In Disputes involving indebtedness or other monetary obligations,
each Party agrees that the other Party may proceed against all liable persons,
jointly and severally against one or more of them, without impairing rights
against other liable persons. Nor shall a Party be required to join the
principal obligor or any other liable persons (e.g., sureties or guarantors) in
any proceeding against a particular person. A Party may release or settle with
one or more liable persons as the Party deems fit without releasing or impairing
rights to proceed against any persons not so released. All statutes of
limitation that would otherwise be applicable shall apply to any arbitration
proceeding.
The party seeking arbitration shall notify the other Party, in writing, of
that Party's desire to arbitrate a dispute; and each Party shall, within twenty
(20) days from the date such notification is received, select an arbitrator, and
those two arbitrators shall select a third arbitrator within ten (10) days
thereafter. The issues or claims in dispute shall be committed to writing,
separately stated and numbered, and each party's proposed answers or contentions
shall be signed below the questions. Failure by a party to select an arbitrator
within the prescribed time period shall serve as that Party's acquiescence and
acceptance of the other party's selection of arbitrator. The arbitrators shall
resolve all Disputes in accordance with the applicable substantive law. Any
Dispute shall be decided by a majority vote of three arbitrators, unless the
claim or amount in controversy does not exceed $100,000.00, in which case a
single arbitrator (who shall have authority to render a maximum award of
$100,000.00, including all damages of any kind, costs and fees) may decide the
Dispute. The arbitrators may grant any remedy or relief that the arbitrators
deem just and equitable and within the scope of this Arbitration Program. The
arbitrators may also grant such ancillary relief as is necessary to make
effective the award. In all arbitration proceedings the arbitrators shall make
specific and written findings of fact and conclusions of law. In all
arbitration proceedings in which the amount in controversy exceeds $100,000.00,
in the aggregate, the Parties shall have in addition to the statutory right to
seek vacation or modification of any award pursuant to applicable law, the right
to seek vacation or modification of any award that is based in whole, or in
part, on an incorrect or erroneous ruling of law by appeal to an appropriate
court having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must be
filed in a court having jurisdiction over the Dispute within 15 days from the
date the award in rendered. The arbitrators' findings of fact shall be binding
on all Parties and shall not be subject to further review except as otherwise
allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in writing
by the Parties or, in the absence of such agreement in Phoenix, Arizona or the
headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this
Arbitration Program shall survive any termination, amendment, or expiration of
the Documents, unless the Parties otherwise expressly agree in writing making
specific reference to this Arbitration Program. To the extent permitted by
applicable law, the arbitrator shall have the power to award recovery of all
costs and fees (including attorney's fees, administrative fees, and arbitrators'
fees) to the prevailing Party. This Arbitration Program may be amended,
changed, or modified only by a writing which specifically refers to this
Arbitration Program and which is signed by all the Parties. If any term,
covenant, condition or provision of the Arbitration Program is found to be
unlawful or invalid or unenforceable, such illegality or invalidity or
unenforceable shall not affect the legality, validity or enforceability of the
remaining parts of this Arbitration Program, and all such remaining parts hereof
shall be valid and enforceable and have full force and effect as if the illegal,
invalid or unenforceable part had not been included. Each Party agrees to keep
all Disputes and arbitration proceedings strictly confidential, except for
disclosures of information required in the ordinary course of business of the
Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be found
to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect. In lieu of such
provision, there shall be added automatically as part of this Agreement, a
provision as similar in its terms to such provision as may be possible and be
legal,
<PAGE>
valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
James Randy Mellard, D.D.S., M.S., P.C.
By: /s/ James R. Mellard, D.D.S.
--------------------------------------
Its: President
-------------------------------------
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
---------------------------------------
Its: Senior Vice President
--------------------------------------
/s/ James R. Mellard, D.D.S.
------------------------------------------
James Randy Mellard, D.D.S., M.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Merger Consideration
A Target Companies
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
4.16 Excluded Assets and Excluded Liabilities
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(1) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
MARY B. MELLARD, D.D.S., P.C.
AND
MARY B. MELLARD, D.D.S.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. TERMS OF THE REORGANIZATION
1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . . . . . 2
1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . 4
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . . 9
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . . 12
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . . 13
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . 13
Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 14
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . . 14
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . 14
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . . 14
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . 15
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 15
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . . . . . 15
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . . 17
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . . . . 18
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . 19
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . . 20
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . . 21
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . 22
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . 23
14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and
executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC.,
a Delaware corporation ("Pentegra"), Mary B. Mellard, D.D.S., P.C.
("Company") and Mary B. Mellard, D.D.S., shareholders of Company (referred
to herein as "Shareholder" or "Shareholders").
WITNESSETH:
WHEREAS, Company operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, the Boards of Directors of the Company and Pentegra have
determined that a reorganization between each of them is in the best
interests of their respective companies;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Company, the "Target Companies")
and simultaneously with the closing of the reorganization contemplated
herein, intends to consummate its initial public offering ("Initial Public
Offering") of shares of its common stock, par value $.01 per share ("Pentegra
Common Stock");
WHEREAS, it is intended for Federal income tax purposes that the
reorganization contemplated by this Agreement shall qualify as an
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE REORGANIZATION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.2 MERGER. Subject to and upon the terms and conditions contained
herein, on the Closing Date, the Company shall be merged with and into
Pentegra (or its designated affiliate, in which case, the references herein
to Pentegra shall be to such designated affiliate and its shares of common
stock) in accordance with this Agreement and the separate corporate existence
of the Company shall thereupon cease ("Merger"). Pentegra shall be the
surviving corporation in the Merger ("Surviving Corporation") and shall
continue to be governed by the laws of the State of Delaware and the separate
corporate existence of
<PAGE>
Pentegra with all rights, privileges, powers, immunities and purposes shall
continue unaffected by the Merger. The Merger shall have the effects
specified in the Delaware General Corporation Law and the Business
Corporation Law. If all the conditions to the Merger set forth herein shall
have been fulfilled or waived in accordance herewith and this Agreement shall
not have been terminated in accordance herewith, the parties hereto shall
cause to be properly executed and filed on the Closing Date Certificates of
Merger for the Company meeting the applicable legal requirements. The
Mergers shall become effective on the Closing Date or the filing of such
documents, in accordance with applicable law, or at such later time as the
parties hereto have agreed upon and designated in such merger filings.
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of
Incorporation and Bylaws of Pentegra shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation until duly amended in
accordance with their terms.
1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra
immediately prior to the effective date of the Merger shall be the directors
of the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal
in accordance with the Surviving Corporation's Certificate of Incorporation
and Bylaws. The persons who are officers of Pentegra immediately prior to
the effective date of the Merger shall be the officers of the Surviving
Corporation and shall hold their respective offices until their successors
have been duly elected or appointed and qualified or until their earlier
death, resignation or removal.
1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and
without any action on the part of the holder thereof, all shares of the
Company's common stock issued and outstanding on the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired and
shall cease to exist, and each holder of a certificate of representing shares
of Company common stock shall thereafter cease to have any rights with
respect to such shares except the right to receive the consideration set
forth on ANNEX I attached hereto (the "Merger Consideration"). Each share
of common stock of the Company held in treasury at the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired
without payment of any consideration therefor. On the effective date of the
Merger, each share of Pentegra Common Stock issued and outstanding shall, by
virtue of he Mergers, and without any action on the part of the holder
thereof, continue unchanged and remain outstanding as a share of validly
issued, fully paid and nonassessable share of Surviving Corporation common
stock.
1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the
Merger, the Shareholders, as the holders of a certificate or certificates
representing shares of Company common stock shall, upon surrender of such
certificate or certificates, receive the Merger Consideration, and until the
certificate or certificates of Company common stock shall have been
surrendered by the Shareholder and replaced by a certificate or certificates
representing Pentegra Common Stock (as set forth on ANNEX I), the certificate
or certificates of Company common stock shall, for all purposes be deemed to
evidence ownership of the number of shares of Pentegra Common Stock
determined in accordance with the provisions of ANNEX I. All shares of
Pentegra Common Stock issuable to the Shareholders in the Merger shall be
deemed for all purposes to have been issued by Pentegra on the Closing Date.
The Shareholders shall deliver to Pentegra at Closing the certificate or
certificates representing the Company common stock owned by them, duly
endorsed in blank by the Shareholders, or accompanied by duly executed blank
stock powers, and with all necessary transfer tax and other revenue stamps,
acquired at the Shareholder's expense, affixed and cancelled.
1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in
<PAGE>
this Agreement, the Company and Shareholders shall execute and deliver all
such deeds, bills of sale, assignments and assurances and take and do all
such other actions and things as may be necessary or desirable to vest,
perfect or confirm any and all right, title and interest in, to and under the
Assets in Pentegra or otherwise to carry out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional
corporation or association, as applicable, duly organized, validly existing
and in good standing under the laws of the State of Texas. Company has all
necessary corporate powers to own all of its assets and to carry on its
business as such business is now being conducted. Company does not own stock
in or control, directly or indirectly, any other corporation, association or
business organization, nor is Company a party to any joint venture or
partnership. The Shareholders are the sole shareholders of Company and own
all outstanding shares of capital stock free of all security interests,
claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each
share of Company's common stock has been legally and validly issued and fully
paid and nonassessable. No shares of capital stock of Company are owned by
Company in treasury. There are no outstanding (a) bonds, debentures, notes or
other obligations the holders of which have the right to vote with the
stockholders of Company on any matter, (b) securities of Company convertible
into equity interests in Company, or (c) commitments, options, rights or
warrants to issue any such equity interests in Company, to issue securities
of Company convertible into such equity interests, or to redeem any
securities of Company. No shares of capital stock of Company have been
issued or disposed of in violation of the preemptive rights, rights of first
refusal or similar rights of any of Company's stockholders. Company is not
required to qualify to do business as a foreign corporation in any other
state or jurisdiction by reason of its business, properties or activities in
or relating to such other state or jurisdiction. Company does not have any
assets, employees or offices in any state other than the state set forth in
the first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate
power to execute, deliver and perform this Agreement and all agreements and
other documents executed and delivered by it pursuant to this Agreement or to
be executed and delivered on the Closing Date, and has taken all action
required by law, its Articles or Certificate of Incorporation, its Bylaws or
otherwise, to authorize the execution, delivery and performance of this
Agreement and such related documents. Each Shareholder has the legal
capacity to enter into and perform this Agreement and the other agreements to
be executed and delivered in connection herewith. Company has obtained the
approval of its stockholders necessary to the consummation of the
transactions contemplated herein. This Agreement and all agreements and
documents executed and delivered in connection herewith have been, or will be
as of the Closing Date, duly executed and delivered by Company and
Shareholders, as appropriate, and constitute or will constitute the legal,
valid and binding obligations of Company and Shareholders, enforceable
against Company and Shareholders in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of
consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, violate any provision of the Articles or
Certificate of Incorporation or Bylaws of Company or any provisions of, or
result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or
decree to which Company or any Shareholder is a party or by which Company or
any Shareholder is bound, or violate any material restrictions of any kind to
which Company is subject, or result in any lien or encumbrance on any of
Company's assets or the Assets.
<PAGE>
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All material
building or other permits, certificates of occupancy, concessions, grants,
franchises, licenses, certificates of need and other governmental
authorizations and approvals required for the conduct of the Business or the
use of the Assets, or waivers thereof, have been duly obtained and are in
full force and effect and are described on EXHIBIT 2.3. There are no
proceedings pending or, to the knowledge of Company and Shareholders,
threatened, which may result in the revocation, cancellation or suspension,
or any adverse modification, of any such licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Company or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been declared or paid by Company on any of its capital stock
since the Balance Sheet Date. No repurchase of any of Company's capital
stock has been approved, effected or is pending, or is contemplated by
Company.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Company and all
amendments thereto have been delivered to Pentegra. The minute books of
Company contain accurate minutes of all meetings of and consents to actions
taken without meetings of the Board of Directors and stockholders of Company
since its formation. The books of account of Company have been kept
accurately in the ordinary course of business and the revenues, expenses,
assets and liabilities of Company have been properly recorded in such books.
2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any
related unaudited statements of income, retained earnings, schedule of
accounts receivable, accounts payable and accrued liabilities, and cash flows
for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Company as of
the dates and for the periods indicated and reflect all fixed and contingent
liabilities of Company.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Company or any Shareholder leases, as lessor or lessee,
real or personal property used in operating the Business, related to the
Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and
enforceable in accordance with their respective terms, and there is not under
any such lease any existing default by Company, as lessor or lessee, or any
condition or event of which any Shareholder or Company has knowledge which
with notice or lapse of time, or both, would constitute a default, in respect
of which Company or Shareholders have not taken adequate steps to cure such
default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Company and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for
<PAGE>
those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Company
shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those
encumbrances indicated on EXHIBIT 1.3(B)) to be released or terminated prior
to the Closing Date and evidence of such releases of liens and claims shall
be provided to Pentegra on the Closing Date and the Assets shall not be used
to satisfy such liens, claims or encumbrances. Pentegra acknowledges that it
has acquired the assets "where and as is" relying solely upon Pentegra's own
examination.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Company, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Company has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Company, including the names of any entities from whom Company previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Company in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Company has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the name of each director and officer of Company
and the offices held by each, (b) the most recent payroll report of Company,
showing all current employees of Company and their current levels of
compensation, (c) promised increases in compensation of employees of Company
that have not yet been effected, (d) oral or written employment agreements,
consulting agreements or independent contractor agreements (and all
amendments thereto) to which Company is a party, copies of which have been
delivered to Pentegra, and (e) all employee manuals, materials, policies,
procedures and work-related rules, copies of which have been delivered to
Pentegra. Company is in compliance with all applicable laws, rules,
regulations and ordinances respecting employment and employment practices.
Company has not engaged in any unfair labor practice. There are no unfair
labor practices charges or complaints pending or threatened against Company,
and Company has never been a party to any agreement with any union, labor
organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Except as set forth on Exhibit 2.16, neither any
Shareholder, Company nor the Business nor any of the Assets is subject to any
pending, nor does Company or any Shareholder have knowledge of any
threatened, litigation, governmental investigation, condemnation or other
proceeding against or relating to or affecting Company, any Shareholder, the
Business, the Assets or the transactions contemplated by this Agreement, and,
to the knowledge of Company and Shareholders, no basis for any such action
exists, nor is there any legal impediment of which Company or any Shareholder
has knowledge to the continued operation of its business or the use of the
Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Company has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Company ("Contracts"), entered
<PAGE>
into in connection with and related to the Assets or the Business, all of
which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of
leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15
(in the case of Contracts other than leases) attached hereto. Except as
otherwise indicated on such Exhibits, all of such Contracts are valid,
binding and enforceable in accordance with their terms and are in full force
and effect, and no defenses, offsets or counterclaims have been asserted or
may be made by any party thereto. Except as indicated on such Exhibits,
there is not under any such Contract any existing default by Company or any
Shareholder, or any condition or event of which Company or any Shareholder
has knowledge which with notice or lapse of time, or both, would constitute a
default. Company and Shareholders have no knowledge of any default by any
other party to such Contracts. Company and Shareholders have not received
notice of the intention of any party to any Contract to cancel or terminate
any Contract and have no reason to believe that any amendment or change to
any Contract is contemplated by any party thereto. Other than those
contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13
and EXHIBIT 2.15, Company are not a party to any material written or oral
agreement contract, lease or arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
the Company or Shareholders, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Company on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement, other than in the course of business;
<PAGE>
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(d) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Company since the Balance Sheet
Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(j) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties,
assets or business or the Business or the Assets, or experienced any other
material adverse change in its financial condition, assets, prospects,
liabilities or business;
(n) Declared or paid a distribution, payment or dividend of any
kind on the capital stock of Company;
(o) Repurchased, approved any repurchase or agreed to repurchase
any of Company's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Company has filed all tax returns (including tax reports
and other statements)
<PAGE>
required to have been filed by it or have been properly extended, and has
paid all taxes (including any interest, penalty or additions thereto)
required to have been paid by it. All such tax returns are complete and
accurate in all respects and properly reflect the relevant taxes for the
periods covered thereby. Company has not received any notice that any tax
deficiency or delinquency has been or may be asserted against Company.
There are no audits relating to taxes of Company pending or in process or, to
the knowledge of Company, threatened. Company is not currently the
beneficiary of any waiver of any statute of limitations in respect of taxes
nor of any extension of time within which to file any tax return or to pay
any tax assessment or deficiency. There are no liens or encumbrances
relating to taxes on or threatened against any of the assets of Company.
Company has withheld and paid all taxes required by law to have been withheld
and paid by it. Neither Company nor any predecessor of Company is or has
been a party to any tax allocation or sharing agreement or a member of an
affiliated group of corporations filing a consolidated Federal income tax
return. Company has delivered to Pentegra correct and complete copies of
Company's three most recently filed annual state, local and Federal income
tax returns, together with all examination reports and statements of
deficiencies assessed against or agreed to by Company during the three
calendar year period preceding the date of this Agreement. Company has
neither made any payments, is obligated to make any payments, or is a party
to any agreement that under any circumstance could obligate it to make any
payments that will not be deductible under Code section 280G.
(b) No Shareholder presently intends to dispose of any of the shares of
Pentegra Common Stock to be received hereunder nor is a party to any plan,
arrangement or agreement for the disposition of such shares. Company and
Shareholders have no knowledge, after due inquiry, of any such intent, plan,
arrangement or agreement by any Shareholder. Nothing contained herein shall
prohibit Shareholders from selling such shares of Pentegra Common Stock after
the designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated
by this Agreement which may be now or hereafter asserted against Pentegra,
Company or Company's shareholders resulting from any action taken by Company
or any Shareholder or their respective agents or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Company did not have, as of the Balance Sheet
Date, and has not incurred since that date and will not have incurred as of
the Closing Date, any material liabilities or obligations of any nature,
whether accrued, absolute, contingent or otherwise, and whether due or to
become due, other than those incurred in the ordinary course of business or
as set forth on EXHIBIT 2.16. Company and Shareholders do not know, or have
reasonable grounds to know, of any basis for the assertion against Company or
any Shareholder as of the Balance Sheet Date, of any claim or liability of
any nature in any amount not fully reflected or reserved against on the
Balance Sheet, or of any claim or liability of any nature arising since that
date other than those incurred in the ordinary course of business or
contemplated by this Agreement. All indebtedness of Company (including
without limitation, indebtedness for borrowed money, guaranties and capital
lease obligations) is described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed
professional of Company carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the
industry. Valid and enforceable policies in such amounts are outstanding and
duly in force and will remain duly in force through the Closing Date. All
such policies are described in EXHIBIT 2.20 attached hereto and true and
correct copies have been delivered to Pentegra. Neither Shareholders nor
Company have not received notice or other communication from the issuer of
any such insurance policy cancelling or amending such policy or threatening
to do so. Neither Company, nor any Shareholder nor any licensed professional
employee of Company has any outstanding claims, settlements or premiums owed
against any insurance policy.
<PAGE>
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Company has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company
Plan," and collectively "Company Plans") have been operated and administered
in all material respects in accordance with all applicable laws, rules and
regulations, including without limitation, ERISA, the Internal Revenue Code
of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment
Act of 1967, as amended, and the related rules and regulations adopted by
those Federal agencies responsible for the administration of such laws. To
the best of the Company's knowledge, no act or failure to act by Company has
resulted in a "prohibited transaction" (as defined in ERISA) with respect to
the Company Plans. No "reportable event" (as defined in ERISA) has occurred
with respect to any of the Company Plans. Company has not previously made,
is not currently making, and is not obligated in any way to make, any
contributions to any multiemployer plan within the meaning of the
Multi-Employer Pension Plan Amendments Act of 1980. With respect to each
Company Plan, either (i) the value of plan assets (including commitments
under insurance contracts) is at least equal to the value of plan liabilities
or (ii) the value of plan liabilities in excess of plan assets is disclosed
on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Company, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and
Company's licensed professional employees, and the conduct of the Business
and use of the Assets, have complied with all applicable laws, rules,
regulations and licensing requirements, including, without limitation, the
Federal Environmental Protection Act, the Occupational Safety and Health Act,
the Americans with Disabilities Act and any environmental laws and medical
waste laws, and there exist no violations by Company, any Shareholder or any
licensed professional employee of Company of any Federal, state or local law
or regulation. Company and Shareholders have not received any notice of a
violation of any Federal, state and local laws, regulations and ordinances
relating to the operations of the Business and Assets and no notice of any
pending inspection or violation of any such law, regulation or ordinance has
been received by Company.
2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed
professional employee or independent contractor of Company has timely filed
all claims or other reports required to be filed with respect to the purchase
of services by third-party payors, and all such claims or reports are
complete and accurate, and has no liability to any payor with respect
thereto. There are no pending appeals, overpayment determinations,
adjustments, challenges, audit, litigation or notices of intent to open
Medicare or Medicaid claim determinations or other reports required to be
filed by Company, any Shareholder and each licensed professional employee of
Company. Neither Company, nor any Shareholder, nor any licensed professional
employee of Company has been convicted of, or pled guilty or nolo contendere
to, patient abuse or negligence, or any other Medicare or Medicaid program
related offense and none has committed any offense which may serve as the
basis for suspension or exclusion from the Medicare and Medicaid programs or
any other third party payor program. With respect to payors, Company,
Shareholders and Company's licensed professional employees have not (a)
knowingly and willfully making
<PAGE>
or causing to be made a false statement or representation of a material fact
in any application for any benefit or payment; (b) knowingly and willfully
making or causing to be made any false statement or representation of a
material fact for use in determining rights to any benefit or payment; (c)
failed to disclose knowledge of the occurrence of any event affecting the
initial or continued right to any benefit or payment on its own behalf or on
behalf of another, with the intent to fraudulently secure such benefit or
payment; and (d) violated any applicable state anti-remuneration or
self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company
or Shareholders in this Agreement, and no Exhibit or certificate issued or
executed by, or information furnished by, officers or directors of Company or
any Shareholder and furnished or to be furnished to Pentegra pursuant hereto,
or in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make the statements or facts contained
therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Company has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Company (or their respective spouses,
children or affiliates) owns directly or indirectly, on an individual or
joint basis, any interest in, has a compensation or other financial
arrangement with, or serves as an officer or director of, any customer or
supplier or competitor of Company or any organization that has a material
contract or arrangement with Company.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Company's services which
accounted for more than 10% of revenues of Company in the preceding fiscal
year. Company has good relations with all such payors and other material
payors of Company and none of such payors has notified Company that it
intends to discontinue its relationship with Company or to deny any claims
submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Company and Shareholders as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of
<PAGE>
Incorporation or Bylaws of Pentegra or any provisions of, or result in the
acceleration of, any obligation under any mortgage, lien, lease, agreement,
rent, instrument, order, arbitration award, judgment or decree to which
Pentegra is a party or by which Pentegra is bound, or violate any material
restrictions of any kind to which Pentegra is subject, or result in any lien
or encumbrance on any of Pentegra's assets. Other than as have been obtained
or as would not have a material adverse effect, there are no consents of any
person or entity required for the transaction contemplated hereby on behalf
of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Pentegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would
not have a material adverse effect, there are no proceedings pending or, to
the knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has knowledge to the continued operation of its business or the use
of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the reorganization contemplated
hereby will be as of the Closing Date duly and validly authorized by all
necessary corporate action on the part of Pentegra. The Pentegra Common
Stock to be issued in connection with the reorganization contemplated hereby,
when issued in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Company or any
Shareholder pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, agree that between the
date hereof and the Closing Date:
<PAGE>
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall
use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Company and
Shareholders agree to complete the Exhibits hereto to be provided by them in
form and substance satisfactory to both Company and Pentegra.
4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the
Business and use the Assets in the ordinary course. Company and Shareholders
shall not enter into any lease, contract, indebtedness, commitment, purchase or
sale or acquire or dispose of any capital asset relating to the Business or the
Assets except in the ordinary course of business. Company and Shareholders
shall use their best efforts to preserve the Business and Assets intact and
shall not take any action that would have an adverse effect on the Business or
Assets. Company and Shareholders shall use their best efforts to preserve
intact the relationships with payors, customers, suppliers, patients and others
having significant business relations with Company. Company and Shareholders
shall collect its receivables and pay its trade payables in the ordinary course
of business. Company and Shareholder shall not introduce any new method of
management, operations or accounting.
4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and
its authorized representatives access to, and make available for inspection, all
of the assets and business of Company, the Business and the Assets, including
employees, customers and suppliers and permit Pentegra and its authorized
representatives to inspect and make copies of all documents, records and
information with respect to the business or assets of Company, the Business or
the Assets as Pentegra or its representatives may request. Company and
Shareholders shall promptly notify Pentegra in writing of (a) any notice or
communication relating to a default or event that, with notice or lapse of time
or both, could become a default, under any contract, commitment or obligation to
which Company is a party or relating to the Business or the Assets, and (b) any
adverse change in Company's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and
Shareholders shall use their best efforts to secure all necessary approvals and
consents of third parties to the consummation of the transactions contemplated
hereby, including consents described on EXHIBIT 2.4. Company and Shareholders
shall use their best efforts to obtain all licenses, permits, approvals or other
authorizations required under any law, rule, regulation, or otherwise to provide
the services of the Practice contemplated by the Service Agreement and to
conduct the intended business of the Practice and operate the Business and use
the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of Closing or the termination of this Agreement in accordance with the
provisions hereof, Company and Shareholders shall not, and shall use its best
efforts to cause Company's employees, agents and representatives not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer, including without limitation,
any proposal or offer to any Shareholder, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of Company or engage
in any negotiations concerning, or provide any confidential information or data
to, or have any discussions with, any person relating to such proposal or offer,
and Company and Shareholders will immediately cease any such activities,
discussions or negotiations heretofore conducted with respect to any of the
foregoing. Company and Shareholders shall immediately notify Pentegra if any
such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund completely
for any accrued benefits, where applicable, or vested accrued benefits for which
Company or any entity might have any liability whatsoever arising from any
insurance, pension plan, employment tax or similar liability of Company to any
employee or other person or entity (including, without limitation, any Company
Plan and any liability under
<PAGE>
employment contracts with Company) allocable to services performed prior to
the Closing Date. Company and Shareholders acknowledge that the purpose and
intent of this covenant is to assure that Pentegra shall have no unfunded
liability whatsoever at any time after the Closing Date with respect to any
of Company's employees or similar persons or entities, including, without
limitation, any Company Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Company shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of any Shareholder (other than in the ordinary course of business) or other
employee or an independent contractor of Company, adopt, amend or terminate any
compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect upon Company, its business, assets or
prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Company, nor will any repurchase of any
of Company's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall
use their best efforts to take, or cause to be taken, all actions necessary to
effect the reorganization contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change
in any material respect the tax or financial accounting methods or practices
followed by Company (including any material change in any assumption underlying,
or any method of calculating, any bad debt, contingency or other reserve),
except as may be required by law or generally accepted accounting principles.
Company and Shareholders will duly, accurately and timely (without regard to any
extensions of time) file all returns, information statements and other documents
relating to taxes of Company required to be filed by it, and pay all taxes
required to be paid by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Company hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Company and Shareholders covenant and agree that all of the
creditors with respect to the Business and the Assets will be paid in full by
Company prior to the Closing Date, except to extent that any liability to such
creditors is assumed by Pentegra pursuant to this Agreement. If required by
Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment
of all creditors with respect to the Business and the Assets. Notwithstanding
the foregoing, Company and Shareholders may dispute the validity or amount of
any such creditor's claim without being deemed to be in violation of this
SECTION 4.11, provided that such dispute is in good faith and does not
unreasonably delay the resolution of the claim and provided, further that
Company and Shareholders agree to indemnify and bond Pentegra for such amounts
as is satisfactory to Pentegra.
4.12 LEASE. If Company leases any of its premises from any Shareholder or
other affiliate of Company or any shareholder of Company, Pentegra shall have
entered into a building lease (the "Building Lease") with the owner of such
premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, (i) a five year initial
term plus three five-year renewal options, (ii) a lease rate equal to the fair
market value lease rate, as agreed to by Pentegra, and (iii) such other
provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with
all requests made
<PAGE>
by Pentegra for the purpose of allowing Pentegra to hire those non-dentist
employees of Company employed by the Company as of the Closing Date, with
such employment to be effective as of the Closing Date. Notwithstanding the
above, Company and Shareholders shall remain liable under any Company Plans
for any claims incurred by any employees or their spouses or dependents, and
for all compensation, bonuses, benefits and other such items and other
liabilities related to Company's employees incurred by Company prior to the
Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all
employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be
treated as "leased employees" (as defined in Code Section 414(n)) of Company and
shall be treated as Clinic employees for purposes of eligibility and
participation in Company Plans.
4.15 INSURANCE. Company shall agree to have and shall assist Pentegra and
its affiliates to be named as an additional insured on its liability insurance
programs, effective as of the Closing Date.
4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a
limited liability company, partnership or other legal entity (the "Practice")
for the purpose of practicing dentistry and entering into the Service
Agreement. The Practice shall be duly organized, in existing and in good
standing under the laws of the State in which the practice of dentistry is
conducted by the Shareholders and the Practice. The Practice shall have all
necessary power to own all of its assets and to carry on its business as such
business is now being conducted. The Shareholders shall be the sole
member/shareholder/partner of the Practice and own all such interests free of
all security interests, claims, encumbrances and liens. Each interest in the
Practice shall be legally and validly issued and fully paid and
nonassessable. There shall be no outstanding (a) bonds, debentures, notes or
other obligations the holders of which have the right to vote with the
members/partners/shareholders of the Practice on any matter, (b) securities
of the Practice convertible into equity interests in the Practice, or (c)
commitments, options, rights or warrants to issue any such equity interests
in the Practice, to issue securities of the Practice convertible into such
equity interests, or to redeem any securities of the Practice. No interests
of the Practice shall have been issued or disposed of in violation of the
preemptive rights, rights of first refusal or similar rights of any of the
Practice's members/partners/shareholders. The Practice shall quality to do
business as a foreign entity in any other state or jurisdiction by reason of
its business, properties or activities in or relating to such other state or
jurisdiction. The Company shall have transferred the Excluded Assets set
forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to
assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for
equity interest in the Practice, and the Company shall have distributed such
equity interests in the Practice to the Shareholders.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations
and minutes of the Practice and all amendments thereto of the Practice shall
have been delivered to Pentegra. The minute books of the Practice shall contain
all accurate minutes of the meetings of and consents to actions taken without
meetings of the members\managers/partners/board of directors of the Practice
since its formation. The books of account of the Practice shall have been kept
accurately in the ordinary course of business and the revenues, expenses, assets
and liabilities of the Practice shall have been properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements and
other documents to be executed and delivered by it pursuant to this Agreement,
including without limitation, the Service Agreement and each Employment
Agreement to be executed and delivered on the Closing Date, and has taken all
action required by law, its Organization/Partnership Agreement/Articles of
Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution,
delivery and performance of such documents. The Service Agreement, the
Employment Agreement and the other agreements contemplated hereby shall have
been duly executed and
<PAGE>
delivered by the Practice on the Closing Date and constitute or will
constitute the legal, valid and binding obligations of the Practice
enforceable against the Practice in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of the Service Agreement, the
Employment Agreements and the other agreements contemplated hereby will not
violate any provision of the organizational documents of the Practice or any
provisions of, or result in the acceleration of, any obligation under any
mortgage, lien, lease, agreement, rent, instrument, order, arbitration award,
judgment or decree to which the Practice is a party or by which the Practice
is bound, or violate any material restrictions of any kind to which the
Practice is subject, or result in any lien or encumbrance on any of the
Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and have filed with the
proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra and Company agree to
complete the Exhibits hereto to be provided by both parties.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS.
Pentegra, Shareholders and Company agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall
cooperate to promptly prepare and file with the Securities Exchange Commission
("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to
be filed by Pentegra in connection with its Initial Public Offering (including
the prospectus constituting a part thereof, the "Registration Statement").
Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits
and approvals required to carry out the transactions contemplated by this
Agreement and the Company and Shareholders shall furnish all information
concerning Company and Shareholders as may be reasonable requested in connection
with any such action.
Company and Shareholder represent and warrant that none of the information
or documents supplied or to be supplied by it specifically for inclusion in the
Registration Statement, by exhibit or otherwise, will, at the time the
Registration Statement and each amendment or supplement thereto, if any, becomes
effective under the Securities Act of 1933, 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, in light of the circumstances under
which they were made, not misleading. Company and Shareholders shall be
entitled to review the Registration Statement and each amendment thereto, if
any, prior to the time each becomes
<PAGE>
effective under the Securities Act of 1933.
Company and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by Pentegra
in connection with the preparation of the Registration Statement and each
amendment or supplement thereto, or any other statement, filing, notice or
application made by or on behalf of each such party or any of its subsidiaries
to any governmental entity in connection with the transactions contemplated by
the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at or
prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Company and Shareholders contained herein shall have been true and correct in
all respects when initially made and shall be true and correct in all respects
as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Company and Shareholders prior to
the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Company shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Company, the Business and the Assets, the results of which shall
be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a mutually agreeable Service Agreement (the
"Service Agreement"), which may be in the form attached hereto as EXHIBIT 7.7,
and otherwise satisfactory to Company and Pentegra, pursuant to which Pentegra
will provide management services to the Practice. Each Shareholder shall have
executed and delivered a mutually agreeable Guaranty Agreement, which may be in
the form attached as EXHIBIT 4.10, and otherwise satisfactory to Company and
Pentegra, of the Service Agreement pursuant to which Shareholder shall, among
other things, guaranty the obligations of the Practice under the Service
Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused
each shareholder of Company that has an existing employment agreement with
Company to have terminated his or her employment agreement with Company and
shall have executed a mutually agreeable employment agreement ("Employment
Agreement") with the Practice, which may be in the form attached hereto as
EXHIBIT 7.8 and otherwise satisfactory to Company and Pentegra.
<PAGE>
7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained
all necessary government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly
executed in form satisfactory to Pentegra and its counsel, referred to in
SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or
payables between Company and its shareholders or affiliates and Company shall
not have any liabilities, including indebtedness, guaranties and capital leases,
that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an
additional insured on their liability insurance program in accordance with
SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Company since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Company and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Pentegra contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Company shall have received all documents, duly
executed in form satisfactory to Company and its counsel, referred to in SECTION
9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by
<PAGE>
Pentegra, subject only to official notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. On or before the Closing Date,
Company and Shareholders shall deliver to Pentegra the following, all of which
shall be in a form satisfactory to counsel to Pentegra and shall be held by
Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing,
pursuant to an escrow agreement or letter agreement in form and substance
mutually acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals of
all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of Company
authorizing the execution, delivery and performance of this Agreement, the
Service Agreement, the Employment Agreements and all related documents and
agreements each certified by the Secretary as being true and correct copies of
the original thereof;
(d) executed merger certificate and/or plan as required by applicable
state law;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra and the original stock certificates together
with blank stock powers representing the outstanding shares of Company common
stock;
(f) certificates of the Shareholders and a duly authorized officer of
Company dated as of the Closing Date, (i) as to the truth and correctness of the
representations and warranties of Company and Shareholder contained herein; (ii)
as to the performance of and compliance by Company and Shareholder with all
covenants contained herein; and (iii) certifying that all conditions precedent
of Company and Shareholders to the Closing have been satisfied;
(g) a certificate of the Secretary of Company certifying as to the
incumbency of the directors and officers of Company and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Company;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Company and any state of required
foreign qualification of Company establishing that Company is in existence and
is in good standing to transact business in its state of incorporation;
(i) an opinion of counsel to Company and Shareholder opining as to
the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Company, the enforceability of this Agreement and the other agreements and
documents to be executed in connection herewith, and other matters reasonably
requested by Pentegra;
(j) non-foreign affidavits executed by Company;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
<PAGE>
(l) an executed Registration Rights Agreement between Pentegra and
Company, in substantially the form attached hereto as EXHIBIT 9.1(L) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall
deliver to Company and Shareholders, the following, all of which shall be in a
form satisfactory to counsel to Company and Shareholders and shall be held by
Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing,
pursuant to an escrow agreement or letter agreement in form and substance
mutually acceptable to the parties hereto:
(a) the Merger Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance of
this Agreement and all related documents and agreements each certified by the
Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii) certifying
that all conditions precedent of Pentegra to the Closing have been satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and the
State of incorporation of Company;
(h) an opinion of counsel to Pentegra opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Pentegra, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Company;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Company to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
<PAGE>
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit attached hereto, any agreement executed pursuant hereto, and
any certificate executed and delivered by any party pursuant to the terms of
this Agreement, shall constitute representations and warranties of Company
and Shareholders, jointly and severally, or of Pentegra, as the case may be.
All such representations and warranties, and all representations and
warranties expressly labeled as such in this Agreement shall survive the date
of this Agreement and the Closing Date for a period of five (5) years
following the Closing Date, except that (i) the representations and
warranties with respect to environmental and medical waste laws and health
care laws and matters shall survive for a period of fifteen (15) years and
tax representations shall survive until one year after the expiration of the
applicable statute of limitations. Each party covenants with the other
parties not to make any claim with respect to such representations and
warranties, against any party after the date on which such survival period
shall terminate. No party shall be entitled to claim indemnity from any
other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has
timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the
case may be. Each party hereby releases, acquits and discharges the other
party from any and all claims and demands, actions and causes of action,
damages, costs, expenses and rights of setoff with respect to which the
notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely
provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD COMPANY AND ITS AFFILIATES, OFFICERS, DIRECTORS,
SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING COMPANY
AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT
APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST
ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES
AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
(D) ANY LIABILITY OF PENTEGRA FOR COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION,
PREPARATION OF CLOSING OF THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT OR
THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION
<PAGE>
HEREWITH,
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR
TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION
10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND
SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS,
DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING,
INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT
APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST
ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS,
DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR
AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL
LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION
ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS
RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER
THE CLOSING DATE,
(E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY
RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A
RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE
NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
<PAGE>
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS
SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS
SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE
REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO
MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the
defense of such action or proceeding, such Indemnified Person shall notify
Indemnitor thereof. If any such action or other proceeding shall be brought
against any Indemnified Person, Indemnitor shall, upon written notice given
within a reasonable time following receipt by Indemnitor of such notice from
Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Company or any Shareholder giving
rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra
shall be entitled to offset the amount of damages incurred by it as a result
of such breach of warranty, representation, covenant or agreement against any
amounts payable by Pentegra, including the amounts payable under the Service
Agreement.
<PAGE>
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Company
or any Shareholder contained in this Agreement or in any certificate or other
document executed and delivered by Company or any Shareholder pursuant to this
Agreement is or becomes untrue or breached in any material respect or if Company
or any Shareholder fails to comply in any material respect with any covenant or
agreement contained herein, and any such misrepresentation, noncompliance or
breach is not cured, waived or eliminated within twenty (20) days after receipt
of written notice thereof;
(c) at any time by Company or any Shareholder if any representation or
warranty of Pentegra contained in this Agreement or in any certificate or other
document executed and delivered by Pentegra pursuant to this Agreement is or
becomes untrue or breached in any material respect or if Pentegra fails to
comply in any material respect with any covenant or agreement contained herein
and such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra, Shareholders or Company if the transaction contemplated
hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Company, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date,
Shareholder shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of
Pentegra Common Stock received as consideration by such party hereunder, (ii)
any interest (including without limitation, an option to buy or sell) in any
shares of Pentegra Common Stock, received by any party hereunder as
consideration, in whole or in part, and no such attempted transfer shall be
treated as effective for any purpose or (b) engage in any transaction, whether
or not with respect to any shares of Pentegra Common Stock or any interest
therein, received by any party hereunder as consideration, the intent or effect
of which is to reduce the risk of owning shares of Pentegra Common Stock. The
certificates evidencing the Pentegra Common Stock delivered to Company pursuant
to the terms hereof will bear a legend substantially in the form set forth below
and containing such other information as Pentegra may deem necessary or
appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the
shares of Pentegra Common Stock to be delivered to Company pursuant to this
Agreement have not been and will not be registered under the Securities Act of
1933 and may not be resold without compliance with the Securities
<PAGE>
Act of 1933. The Pentegra Common Stock to be acquired by Shareholders
pursuant to this Agreement is being acquired solely for its own account, for
investment purposes only and with no present intention of distributing,
selling or otherwise disposing of it in connection with a distribution. Each
Shareholder covenants, warrants and represents that none of the shares of
Pentegra Common Stock issued to it will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the Securities Act, as
amended, and the rules and regulations of the Securities Exchange Commission
and applicable state securities laws and regulations. All certificates
evidencing shares of Pentegra Common Stock shall bear the following legend in
addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Company resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the
economic risk of an investment in Pentegra Common Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and
have such knowledge and experience in financial and business matters that
they are capable of evaluating the merits and risks of the proposed
investment and therefore have the capacity to protect their own interests in
connection with the acquisition of the Pentegra Common Stock. Shareholders
and their representatives have had an adequate opportunity to ask questions
and receive answers from the officers of Pentegra concerning any and all
matters relating to the background and experience of the officers and
directors of Pentegra, the plans for the operations of the business of
Pentegra, and any plans for additional acquisitions and the like.
Shareholders and their representatives have asked any and all questions in
the nature described in the preceding sentence and all questions have been
answered to their satisfaction. Shareholders are "accredited investor" as
defined in Regulation D of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is a valuable, special and unique asset of
Pentegra's businesses. Company and Shareholders agree that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally
through no fault of Company or Shareholders, (ii) disclosure is required by
law or the order of any governmental authority under color of law, provided,
that prior to disclosing any information pursuant to this clause (ii),
Company and Shareholders shall, if possible, give prior written notice
thereof to the other parties hereto, and provide such other parties hereto
with the opportunity to contest such disclosure, (iii) Company and
Shareholders reasonably believe that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party, or
(iv) Company and Shareholders are the sole and exclusive owner of such
confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Company or Shareholders of the provisions of this SECTION 13, Pentegra shall
be entitled to an injunction restraining Company and Shareholders from
disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Pentegra from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. The obligations of the parties under this SECTION 13 shall
survive the termination of this Agreement.
Pentegra recognizes and acknowledges that it had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Company that is a valuable, special and unique
<PAGE>
asset of Company. Pentegra agrees that it will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, unless (i) such information becomes
available to or known by the public generally through no fault of Pentegra,
(ii) disclosure is required by law or the order of any governmental authority
under color of law, provided, that prior to disclosing any information
pursuant to this clause (ii), Pentegra shall, if possible, give prior written
notice thereof to the other parties hereto, and provide such other parties
hereto with the opportunity to contest such disclosure, (iii) Pentegra
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party, or (iv) Pentegra is the
sole and exclusive owner of such confidential information as a result of the
transaction contemplated hereunder or otherwise. In the event of a breach or
threatened breach by Pentegra of the provision of this SECTION 13, Company
shall be entitled to an injunction restraining Pentegra from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting Pentegra from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages. The
obligations of the parties under this SECTION 13 shall survive the
termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement will qualify as a reorganization within the meaning of Section
368(a) of the Code. The tax returns (and schedules thereto) of Shareholders,
Company and Pentegra shall be filed in a manner consistent with such intention
and Shareholders and Pentegra shall each provide the other with such tax
information, reports, returns or schedules as may be reasonably required to
assist the other in so reporting the transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery, or by
facsimile AND overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Company and Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
<PAGE>
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Company or any Shareholder for services
rendered in connection with negotiating and closing the transactions
contemplated by this Agreement or the documents to be executed in connection
herewith, whether or not such costs or expenses are incurred before or after
the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Company.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF TEXAS
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS AND THE ESCROW LETTER ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT
OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS
BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which
<PAGE>
when so executed shall be deemed to be an original, and such counterparts
shall together constitute and be one and the same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Company, be relieved from its obligations
to Company under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Company, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Company and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Company or may demand from Company, and Company agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Company or Shareholders (hereinafter referred to as a "Party"), whether made
before or after the institution of any legal proceeding, any dispute among
the parties hereto in any way arising out of, related to, or in connection
with this Agreement (hereinafter a "Dispute"), shall be resolved by binding
arbitration in accordance with the terms of this Section (hereinafter the
"Arbitration Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or
<PAGE>
preliminary judicial or non-judicial self help remedies for the purposes of
obtaining, perfecting, preserving, or foreclosing upon any personal property
in which there has been granted a security interest or lien by a Party in the
Documents. In Disputes involving indebtedness or other monetary obligations,
each Party agrees that the other Party may proceed against all liable
persons, jointly and severally against one or more of them, without impairing
rights against other liable persons. Nor shall a Party be required to join
the principal obligor or any other liable persons (e.g., sureties or
guarantors) in any proceeding against a particular person. A Party may
release or settle with one or more liable persons as the Party deems fit
without releasing or impairing rights to proceed against any persons not so
released. All statutes of limitation that would otherwise be applicable
shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoenix,
Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or by
applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal,
<PAGE>
valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
Mary B. Mellard, D.D.S., P.C.
By: /s/ Mary B. Mellard, D.D.S.
-------------------------------------
Its: President
------------------------------------
PENTEGRA DENTAL GROUP, INC.
By: /s/ James L. Dunn, Jr.
-------------------------------------
Its: Senior Vice President
------------------------------------
/s/ Mary B. Mellard, D.D.S.
-----------------------------------------
Mary B. Mellard, D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Merger Consideration
A Target Companies
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment
Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
4.16 Excluded Assets and Excluded Liabilities
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
T.L. MULLOOLY, D.D.S., INC.,
and
T.L. MULLOOLY, D.D.S.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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Section 1. TERMS OF THE REORGANIZATION
1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . . . . 2
1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 4
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 9
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
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Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 12
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 13
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 13
Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 14
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 14
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 14
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 14
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 14
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 15
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 15
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 15
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
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Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . . . . 15
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 17
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . . . 18
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 19
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 20
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 21
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . . . 22
14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . 22
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . 23
14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and
executed to be effective August 20, 1997, is by and among PENTEGRA DENTAL
GROUP, INC., a Delaware corporation ("Pentegra"), T.L. MULLOOLY, D.D.S., INC., a
California professional coropration ("Company") and T.L. MULLOOLY, D.D.S.,
shareholder of Company (referred to herein as "Shareholder" or "Shareholders").
WITNESSETH:
WHEREAS, Company operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, the Boards of Directors of the Company and Pentegra have
determined that a reorganization between each of them is in the best interests
of their respective companies;
WHEREAS, Pentegra or its affiliated designee has entered into or intends to
enter into Agreements and Plans of Reorganization, Asset Contribution Agreements
and other acquisition agreements (collectively, the "Other Agreements") with
such persons or entities or the stockholders of such entities listed on EXHIBIT
A (together with Company, the "Target Companies") and simultaneously with the
closing of the reorganization contemplated herein, intends to consummate its
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock");
WHEREAS, it is intended for Federal income tax purposes that the
reorganization contemplated by this Agreement shall qualify as an reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE REORGANIZATION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock
is consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".
1.2 MERGER. Subject to and upon the terms and conditions contained
herein, on the Closing Date, the Company shall be merged with and into Pentegra
(or its designated affiliate, in which case, the references herein to Pentegra
shall be to such designated affiliate and its shares of common stock) in
accordance with this Agreement and the separate corporate existence of the
Company shall thereupon cease
<PAGE>
("Merger"). Pentegra shall be the surviving corporation in the Merger
("Surviving Corporation") and shall continue to be governed by the laws of
the State of Delaware and the separate corporate existence of Pentegra with
all rights, privileges, powers, immunities and purposes shall continue
unaffected by the Merger. The Merger shall have the effects specified in the
Delaware General Corporation Law and the California Business Corporation Law.
If all the conditions to the Merger set forth herein shall have been
fulfilled or waived in accordance herewith and this Agreement shall not have
been terminated in accordance herewith, the parties hereto shall cause to be
properly executed and filed on the Closing Date Certificates of Merger for
the Company meeting the applicable legal requirements. The Mergers shall
become effective on the Closing Date or the filing of such documents, in
accordance with applicable law, or at such later time as the parties hereto
have agreed upon and designated in such merger filings.
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of
Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation
and Bylaws of the Surviving Corporation until duly amended in accordance with
their terms.
1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra
immediately prior to the effective date of the Merger shall be the directors of
the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
Bylaws. The persons who are officers of Pentegra immediately prior to the
effective date of the Merger shall be the officers of the Surviving Corporation
and shall hold their respective offices until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal.
1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and
without any action on the part of the holder thereof, all shares of the
Company's common stock issued and outstanding on the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired and
shall cease to exist, and each holder of a certificate of representing shares of
Company common stock shall thereafter cease to have any rights with respect to
such shares except the right to receive the consideration set forth on ANNEX I
attached hereto (the "Merger Consideration"). Each share of common stock of
the Company held in treasury at the effective date of the Merger shall cease to
be outstanding and shall be cancelled and retired without payment of any
consideration therefor. On the effective date of the Merger, each share of
Pentegra Common Stock issued and outstanding shall, by virtue of he Mergers, and
without any action on the part of the holder thereof, continue unchanged and
remain outstanding as a share of validly issued, fully paid and nonassessable
share of Surviving Corporation common stock.
1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger,
the Shareholders, as the holders of a certificate or certificates representing
shares of Company common stock shall, upon surrender of such certificate or
certificates, receive the Merger Consideration, and until the certificate or
certificates of Company common stock shall have been surrendered by the
Shareholder and replaced by a certificate or certificates representing Pentegra
Common Stock (as set forth on ANNEX I), the certificate or certificates of
Company common stock shall, for all purposes be deemed to evidence ownership of
the number of shares of Pentegra Common Stock determined in accordance with the
provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the
Shareholders in the Merger shall be deemed for all purposes to have been issued
by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at
Closing the certificate or certificates representing the Company common stock
owned by them, duly endorsed in blank by the Shareholders, or accompanied by
duly executed blank stock powers, and with all necessary transfer tax and other
revenue stamps, acquired at the Shareholder's expense, affixed and cancelled.
1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under
<PAGE>
any of the Assets or otherwise to carry out this Agreement, in return for the
consideration set forth in this Agreement, the Company and Shareholders shall
excecute and deliver all such deeds, bills of sale, assignments and
assurances and take and do all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under the Assets in Pentegra or otherwise to carry
out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional
corporation or association, as applicable, duly organized, validly existing and
in good standing under the laws of the State of California. Company has all
necessary corporate powers to own all of its assets and to carry on its business
as such business is now being conducted. Company does not own stock in or
control, directly or indirectly, any other corporation, association or business
organization, nor is Company a party to any joint venture or partnership. The
Shareholders are the sole shareholders of Company and own all outstanding shares
of capital stock free of all security interests, claims, encumbrances and liens
in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock
has been legally and validly issued and fully paid and nonassessable. No shares
of capital stock of Company are owned by Company in treasury. There are no
outstanding (a) bonds, debentures, notes or other obligations the holders of
which have the right to vote with the stockholders of Company on any matter, (b)
securities of Company convertible into equity interests in Company, or (c)
commitments, options, rights or warrants to issue any such equity interests in
Company, to issue securities of Company convertible into such equity interests,
or to redeem any securities of Company. No shares of capital stock of Company
have been issued or disposed of in violation of the preemptive rights, rights of
first refusal or similar rights of any of Company's stockholders. Company is
not required to qualify to do business as a foreign corporation in any other
state or jurisdiction by reason of its business, properties or activities in or
relating to such other state or jurisdiction. Company does not have any assets,
employees or offices in any state other than the state set forth in the first
sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power
to execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all action required by
law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to
authorize the execution, delivery and performance of this Agreement and such
related documents. Each Shareholder has the legal capacity to enter into and
perform this Agreement and the other agreements to be executed and delivered in
connection herewith. Company has obtained the approval of its stockholders
necessary to the consummation of the transactions contemplated herein. This
Agreement and all agreements and documents executed and delivered in connection
herewith have been, or will be as of the Closing Date, duly executed and
delivered by Company and Shareholders, as appropriate, and constitute or will
constitute the legal, valid and binding obligations of Company and Shareholders,
enforceable against Company and Shareholders in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of consents
described on EXHIBIT 2.4, the consummation of the actions contemplated hereby
will not, violate any provision of the Articles or Certificate of Incorporation
or Bylaws of Company or any provisions of, or result in the acceleration of, any
obligation under any mortgage, lien, lease, agreement, rent, instrument, order,
arbitration award, judgment or decree to which Company or any Shareholder is a
party or by which Company or any Shareholder is bound, or violate any material
restrictions of any kind to which Company is subject, or result in any lien or
encumbrance on any of Company's assets or the Assets.
<PAGE>
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets, or
waivers thereof, have been duly obtained and are in full force and effect and
are described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Company and Shareholders, threatened, which may result in the
revocation, cancellation or suspension, or any adverse modification, of any such
licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Company or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been declared or paid by Company on any of its capital stock
since the Balance Sheet Date. No repurchase of any of Company's capital stock
has been approved, effected or is pending, or is contemplated by Company.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Company and all amendments
thereto have been delivered to Pentegra. The minute books of Company contain
accurate minutes of all meetings of and consents to actions taken without
meetings of the Board of Directors and stockholders of Company since its
formation. The books of account of Company have been kept accurately in the
ordinary course of business and the revenues, expenses, assets and liabilities
of Company have been properly recorded in such books.
2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any related
unaudited statements of income, retained earnings, schedule of accounts
receivable, accounts payable and accrued liabilities, and cash flows for the
twelve months then ended (collectively, with the related notes thereto, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and results of operations of Company as of the dates and for the
periods indicated and reflect all fixed and contingent liabilities of Company.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Company or any Shareholder leases, as lessor or lessee, real
or personal property used in operating the Business, related to the Assets or
otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in
accordance with their respective terms, and there is not under any such lease
any existing default by Company, as lessor or lessee, or any condition or event
of which any Shareholder or Company has knowledge which with notice or lapse of
time, or both, would constitute a default, in respect of which Company or
Shareholders have not taken adequate steps to cure such default or to prevent a
default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Company and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set
forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to
<PAGE>
the Closing Date and evidence of such releases of liens and claims shall be
provided to Pentegra on the Closing Date and the Assets shall not be used to
satisfy such liens, claims or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned or
used by Company, are in good, current, standard and merchantable condition and
are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Company has no right, title or interest in or to patents, patent rights,
corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT
2.12 is a listing of all names of all predecessor companies of Company,
including the names of any entities from whom Company previously acquired
significant assets. Except for off-the-shelf software licenses and except as
set forth on EXHIBIT 2.12, Company is not a licensee in respect of any patents,
trademarks, service marks, trade names, copyrights or applications therefor, or
manufacturing processes, formulas or trade secrets or similar items and no such
licenses are necessary for the conduct of the Business or the use of the Assets.
No claim is pending or has been made to the effect that the Assets or the
present or past operations of Company in connection with the Assets or Business
infringe upon or conflict with the asserted rights of others to any patents,
patent rights, manufacturing processes, trade names, trademarks, service marks,
inventions, licenses, specialized treatment protocols, copyrights, formulas,
know-how and trade secrets. Company has the sole and exclusive right to use all
Assets constituting proprietary rights without infringing or violating the
rights of any third parties and no consents of any third parties are required
for the use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on
EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this
Agreement of: (a) the name of each director and officer of Company and the
offices held by each, (b) the most recent payroll report of Company, showing all
current employees of Company and their current levels of compensation, (c)
promised increases in compensation of employees of Company that have not yet
been effected, (d) oral or written employment agreements, consulting agreements
or independent contractor agreements (and all amendments thereto) to which
Company is a party, copies of which have been delivered to Pentegra, and (e) all
employee manuals, materials, policies, procedures and work-related rules, copies
of which have been delivered to Pentegra. Company is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Company has not engaged in any unfair labor practice.
There are no unfair labor practices charges or complaints pending or threatened
against Company, and Company has never been a party to any agreement with any
union, labor organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the Business
nor any of the Assets is subject to any pending, nor does Company or any
Shareholder have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Company, any Shareholder, the Business, the Assets or the transactions
contemplated by this Agreement, and, to the knowledge of Company and
Shareholders, no basis for any such action exists, nor is there any legal
impediment of which Company or any Shareholder has knowledge to the continued
operation of its business or the use of the Assets in the ordinary course,
subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Company has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts, obligations
and commitments of Company ("Contracts"), entered into in connection with and
related to the Assets or the Business, all of which are listed or incorporated
by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case
of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than
leases) attached hereto. Except as otherwise indicated on such Exhibits, all of
such Contracts are valid, binding and enforceable in accordance with their terms
and are in full force and effect, and no defenses, offsets or counterclaims have
been asserted or may be made by any party thereto. Except as indicated on such
Exhibits, there is not under any such Contract any existing default
<PAGE>
by Company or any Shareholder, or any condition or event of which Company or
any Shareholder has knowledge which with notice or lapse of time, or both,
would constitute a default. Company and Shareholders have no knowledge of
any default by any other party to such Contracts. Company and Shareholders
have not received notice of the intention of any party to any Contract to
cancel or terminate any Contract and have no reason to believe that any
amendment or change to any Contract is contemplated by any party thereto.
Other than those contracts, obligations and commitments listed on EXHIBIT
2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material
written or oral agreement contract, lease or arrangement, including without
limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product or
service;
(h) Loan agreement or other contract for money borrowed or lent or to
be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of the
Company or Shareholders, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Company on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) or entered into any contract, lease, license or
commitment, except in connection with the performance of this Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued, contingent
or otherwise) other than (i) liabilities shown or reflected on the Balance
Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary
course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
<PAGE>
(d) Made any payments to or loaned any money to any person or entity
other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have been
required due to income or operations of Company since the Balance Sheet Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants or
agents, or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of any officer, employee, consultant or agent;
(j) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties, assets
or business or the Business or the Assets, or experienced any other material
adverse change in its financial condition, assets, prospects, liabilities or
business;
(n) Declared or paid a distribution, payment or dividend of any kind
on the capital stock of Company;
(o) Repurchased, approved any repurchase or agreed to repurchase any
of Company's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Company has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it. All such tax returns are complete and accurate in all respects and
properly reflect the relevant taxes for the periods covered thereby. Company
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Company. There are no audits relating to taxes of
Company pending or in process or, to the knowledge of Company, threatened.
Company is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency. There are no
liens or encumbrances relating to taxes on or threatened against any of the
assets of Company. Company has withheld
<PAGE>
and paid all taxes required by law to have been withheld and paid by it.
Neither Company nor any predecessor of Company is or has been a party to any
tax allocation or sharing agreement or a member of an affiliated group of
corporations filing a consolidated Federal income tax return. Company has
delivered to Pentegra correct and complete copies of Company's three most
recently filed annual state, local and Federal income tax returns, together
with all examination reports and statements of deficiencies assessed against
or agreed to by Company during the three calendar year period preceding the
date of this Agreement. Company has neither made any payments, is obligated
to make any payments, or is a party to any agreement that under any
circumstance could obligate it to make any payments that will not be
deductible under Code section 280G.
(b) No Shareholder presently intends to dispose of any of the shares of
Pentegra Common Stock to be received hereunder nor is a party to any plan,
arrangement or agreement for the disposition of such shares. Company and
Shareholders have no knowledge, after due inquiry, of any such intent, plan,
arrangement or agreement by any Shareholder. Nothing contained herein shall
prohibit Shareholders from selling such shares of Pentegra Common Stock after
the designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated by
this Agreement which may be now or hereafter asserted against Pentegra, Company
or Company's shareholders resulting from any action taken by Company or any
Shareholder or their respective agents or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against
on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and
has not incurred since that date and will not have incurred as of the Closing
Date, any liabilities or obligations of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, other than those
incurred in the ordinary course of business or as set forth on EXHIBIT 2.16.
Company and Shareholders do not know, or have reasonable grounds to know, of any
basis for the assertion against Company or any Shareholder as of the Balance
Sheet Date, of any claim or liability of any nature in any amount not fully
reflected or reserved against on the Balance Sheet, or of any claim or liability
of any nature arising since that date other than those incurred in the ordinary
course of business or contemplated by this Agreement. All indebtedness of
Company (including without limitation, indebtedness for borrowed money,
guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached
hereto.
2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed
professional of Company carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the industry.
Valid and enforceable policies in such amounts are outstanding and duly in force
and will remain duly in force through the Closing Date. All such policies are
described in EXHIBIT 2.20 attached hereto and true and correct copies have been
delivered to Pentegra. Neither Shareholders nor Company have not received
notice or other communication from the issuer of any such insurance policy
cancelling or amending such policy or threatening to do so. Neither Company,
nor any Shareholder nor any licensed professional employee of Company has any
outstanding claims, settlements or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached
hereto, Company has neither established, nor maintains, nor is obligated to make
contributions to or under or otherwise participate in, (a) any bonus or other
type of compensation or employment plan, program, agreement, policy, commitment,
contract or arrangement (whether or not set forth in a written document); (b)
any pension, profit-sharing, retirement or other plan, program or arrangement;
or (c) any other employee benefit plan, fund or program, including, but not
limited to, those described in SECTION 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT
2.20 (individually "Company
<PAGE>
Plan," and collectively "Company Plans") have been operated and administered
in all material respects in accordance with all applicable laws, rules and
regulations, including without limitation, ERISA, the Internal Revenue Code
of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment
Act of 1967, as amended, and the related rules and regulations adopted by
those Federal agencies responsible for the administration of such laws. No
act or failure to act by Company has resulted in a "prohibited transaction"
(as defined in ERISA) with respect to the Company Plans. No "reportable
event" (as defined in ERISA) has occurred with respect to any of the Company
Plans. Company has not previously made, is not currently making, and is not
obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Company Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at least equal to the
value of plan liabilities or (ii) the value of plan liabilities in excess of
plan assets is disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing
Date, a party to any agreement or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree, rule or
regulation that materially and adversely affects the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Company,
the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's
licensed professional employees, and the conduct of the Business and use of the
Assets, have complied with all applicable laws, rules, regulations and licensing
requirements, including, without limitation, the Federal Environmental
Protection Act, the Occupational Safety and Health Act, the Americans with
Disabilities Act and any environmental laws and medical waste laws, and there
exist no violations by Company, any Shareholder or any licensed professional
employee of Company of any Federal, state or local law or regulation. Company
and Shareholders have not received any notice of a violation of any Federal,
state and local laws, regulations and ordinances relating to the operations of
the Business and Assets and no notice of any pending inspection or violation of
any such law, regulation or ordinance has been received by Company.
2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed
professional employee or independent contractor of Company has timely filed all
claims or other reports required to be filed with respect to the purchase of
services by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are no
pending appeals, overpayment determinations, adjustments, challenges, audit,
litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Company, any Shareholder
and each licensed professional employee of Company. Neither Company, nor any
Shareholder, nor any licensed professional employee of Company has been
convicted of, or pled guilty or nolo contendere to, patient abuse or negligence,
or any other Medicare or Medicaid program related offense and none has committed
any offense which may serve as the basis for suspension or exclusion from the
Medicare and Medicaid programs or any other third party payor program. With
respect to payors, Company, Shareholders and Company's licensed professional
employees has not (a) knowingly and willfully making or causing to be made a
false statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in determining
rights to any benefit or payment; (c) failed to disclose knowledge of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company
or Shareholders in this Agreement, and no Exhibit or certificate issued or
executed by, or information furnished by, officers or directors of Company or
any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or
in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a
<PAGE>
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Company has with any bank or other
financial institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Company, or their respective spouses,
children or affiliates, owns directly or indirectly, on an individual or joint
basis, any interest in, has a compensation or other financial arrangement with,
or serves as an officer or director of, any customer or supplier or competitor
of Company or any organization that has a material contract or arrangement with
Company.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of
the names and addresses of each payor of Company's services which accounted for
more than 10% of revenues of Company in the preceding fiscal year. Company has
good relations with all such payors and other material payors of Company and
none of such payors has notified Company that it intends to discontinue its
relationship with Company or to deny any claims submitted to such payor for
payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Company and Shareholders as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions required
by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize
the execution, delivery and performance of this Agreement and such related
documents. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing Date,
duly executed and delivered by Pentegra and constitute or will constitute the
legal, valid and binding obligations of Pentegra, enforceable against Pentegra
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and delivery
of this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and, the
consummation of the actions contemplated hereby will not, violate any provision
of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or decree
to which Pentegra is a party or by which Pentegra is bound, or violate any
material restrictions of any kind to which Pentegra is subject, or result in any
lien or encumbrance on any of Pentegra's assets. Other than as have been
obtained or as would not have a material adverse effect, there are no consents
of any person or entity required for the transaction contemplated hereby on
behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon
<PAGE>
Pentegra. Other than as would not have a material adverse effect, there are
no proceedings pending or, to the knowledge of Pentegra, threatened, which
may result in the revocation, cancellation or suspension, or any adverse
modification, of any such licenses or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any pending,
nor does Pentegra have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Pentegra, its business, assets or the transactions contemplated by
this Agreement, and, to the knowledge of Pentegra, no basis for any such action
exists, nor is there any legal impediment of which Pentegra has knowledge to the
continued operation of its business or the use of its Assets in the ordinary
course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports and
other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it, other than as would not have a material adverse effect. Pentegra
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Pentegra. There are no audits relating to taxes of
Pentegra pending or in process or, to the knowledge of Pentegra, threatened.
Pentegra is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the reorganization contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the reorganization contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra
in this Agreement, and no Exhibit or certificate issued by officers or directors
of Pentegra and furnished or to be furnished to Company or any Shareholder
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, agree that between the
date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall
use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Company and
Shareholders agree to complete the Exhibits hereto to be provided by them in
form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the
Business and use the Assets in the ordinary course. Company and Shareholders
shall not enter into any lease, contract, indebtedness, commitment, purchase or
sale or acquire or dispose of any capital asset relating to the Business or the
Assets except in the ordinary course of business. Company and Shareholders
shall use their best efforts to preserve the Business and Assets intact and
shall not take any action that would have an adverse effect on the Business or
Assets. Company and Shareholders shall use their best efforts to preserve
intact the
<PAGE>
relationships with payors, customers, suppliers, patients and others having
significant business relations with Company. Company and Shareholders shall
collect its receivables and pay its trade payables in the ordinary course of
business. Company and Shareholdes shall not introduce any new method of
management, operations or accounting.
4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and
its authorized representatives access to, and make available for inspection, all
of the assets and business of Company, the Business and the Assets, including
employees, customers and suppliers and permit Pentegra and its authorized
representatives to inspect and make copies of all documents, records and
information with respect to the business or assets of Company, the Business or
the Assets as Pentegra or its representatives may request. Company and
Shareholders shall promptly notify Pentegra in writing of (a) any notice or
communication relating to a default or event that, with notice or lapse of time
or both, could become a default, under any contract, commitment or obligation to
which Company is a party or relating to the Business or the Assets, and (b) any
adverse change in Company's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and
Shareholders shall use their best efforts to secure all necessary approvals and
consents of third parties to the consummation of the transactions contemplated
hereby, including consents described on EXHIBIT 2.4. Company and Shareholders
shall use their best efforts to obtain all licenses, permits, approvals or other
authorizations required under any law, rule, regulation, or otherwise to provide
the services of the Practice contemplated by the Service Agreement and to
conduct the intended business of the Practice and operate the Business and use
the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of Closing or the termination of this Agreement in accordance with the
provisions hereof, Company and Shareholders shall not, and shall use its best
efforts to cause Company's employees, agents and representatives not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer, including without limitation,
any proposal or offer to any Shareholder, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of Company or engage
in any negotiations concerning, or provide any confidential information or data
to, or have any discussions with, any person relating to such proposal or offer,
and Company and Shareholders will immediately cease any such activities,
discussions or negotiations heretofore conducted with respect to any of the
foregoing. Company and Shareholders shall immediately notify Pentegra if any
such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund completely
for any accrued benefits, where applicable, or vested accrued benefits for which
Company or any entity might have any liability whatsoever arising from any
insurance, pension plan, employment tax or similar liability of Company to any
employee or other person or entity (including, without limitation, any Company
Plan and any liability under employment contracts with Company) allocable to
services performed prior to the Closing Date. Company and Shareholders
acknowledge that the purpose and intent of this covenant is to assure that
Pentegra shall have no unfunded liability whatsoever at any time after the
Closing Date with respect to any of Company's employees or similar persons or
entities, including, without limitation, any Company Plan for the period prior
to the Closing Date.
4.7 EMPLOYEE MATTERS. Company shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of any Shareholder (other than in the ordinary course of business) or other
employee or an independent contractor of Company, adopt, amend or terminate any
compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect
<PAGE>
upon Company, its business, assets or prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Company, nor will any repurchase of any
of Company's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall
use their best efforts to take, or cause to be taken, all actions necessary to
effect the reorganization contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change
in any material respect the tax or financial accounting methods or practices
followed by Company (including any material change in any assumption underlying,
or any method of calculating, any bad debt, contingency or other reserve),
except as may be required by law or generally accepted accounting principles.
Company and Shareholders will duly, accurately and timely (without regard to any
extensions of time) file all returns, information statements and other documents
relating to taxes of Company required to be filed by it, and pay all taxes
required to be paid by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Company hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Company and Shareholders covenant and agree that all of the
creditors with respect to the Business and the Assets will be paid in full by
Company prior to the Closing Date, except to extent that any liability to such
creditors is assumed by Pentegra pursuant to this Agreement. If required by
Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment
of all creditors with respect to the Business and the Assets. Notwithstanding
the foregoing, Company and Shareholders may dispute the validity or amount of
any such creditor's claim without being deemed to be in violation of this
SECTION 4.11, provided that such dispute is in good faith and does not
unreasonably delay the resolution of the claim and provided, further that
Company and Shareholders agree to indemnify and bond Pentegra for such amounts
as is satisfactory to Pentegra.
4.12 LEASE. If Company leases any of its premises from any Shareholder or
other affiliate of Company or any shareholder of Company, Pentegra shall have
entered into a building lease (the "Building Lease") with the owner of such
premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, (i) a five year initial
term plus three five-year renewal options, (ii) a lease rate equal to the fair
market value lease rate, as agreed to by Pentegra, and (iii) such other
provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with
all requests made by Pentegra for the purpose of allowing Pentegra to hire those
non-dentist employees of Company designated by Pentegra, such employment to be
effective as of the Closing Date. Notwithstanding the above, Company and
Shareholders shall remain liable under any Company Plans for any claims incurred
by any employees or their spouses or dependents, and for all compensation,
bonuses, benefits and other such items and other liabilities related to
Company's employees incurred by Company prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all
employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be
treated as "leased employees" (as defined in Code Section 414(n)) of Company and
shall be treated as Clinic employees for purposes of eligibility and
participation in Company Plans.
4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective as
of the Closing Date.
<PAGE>
4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a
limited liability company, partnership or other legal entity (the "Practice")
approved by Pentegra for the purpose of practicing dentistry and entering
into the Service Agreement. The Practice shall be duly organized, in
existing and in good standing under the laws of the State in which the
practice of dentistry is conducted by the Shareholders and the Practice. The
Practice shall have all necessary power to own all of its assets and to carry
on its business as such business is now being conducted. The Shareholders
shall be the sole member/shareholder/partner of the Practice and own all such
interests free of all security interests, claims, encumbrances and liens.
Each interest in the Practice shall be legally and validly issued and fully
paid and nonassessable. There shall be no outstanding (a) bonds, debentures,
notes or other obligations the holders of which have the right to vote with
the members/partners/shareholders of the Practice on any matter, (b)
securities of the Practice convertible into equity interests in the Practice,
or (c) commitments, options, rights or warrants to issue any such equity
interests in the Practice, to issue securities of the Practice convertible
into such equity interests, or to redeem any securities of the Practice. No
interests of the Practice shall have been issued or disposed of in violation
of the preemptive rights, rights of first refusal or similar rights of any of
the Practice's members/partners/shareholders. The Practice shall quality to
do business as a foreign entity in any other state or jurisdiction by reason
of its business, properties or activities in or relating to such other state
or jurisdiction. The Company shall have transferred the Excluded Assets set
forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to
assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for
equity interest in the Practice, and the Company shall have distributed such
equity interests in the Practice to the Shareholders.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations
and minutes of the Practice and all amendments thereto of the Practice shall
have been delivered to Pentegra and shall be in form and substance satisfactory
to Pentegra. The minute books of the Practice shall contain all accurate
minutes of the meetings of and consents to actions taken without meetings of the
members\managers/partners/board of directors of the Practice since its
formation. The books of account of the Practice shall have been kept accurately
in the ordinary course of business and the revenues, expenses, assets and
liabilities of the Practice shall have been properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements and
other documents to be executed and delivered by it pursuant to this Agreement,
including without limitation, the Service Agreement and each Employment
Agreement or to be executed and delivered on the Closing Date, and has taken all
action required by law, its Organization/Partnership Agreement/Articles of
Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution,
delivery and performance of such documents. The Service Agreement, the
Employment Agreement and the other agreements contemplated hereby shall have
been duly executed and delivered by the Practice and constitute or will
constitute the legal, valid and binding obligations of the Practice enforceable
against the Practice in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of the Service Agreement, the Employment Agreements and
the other agreements contemplated hereby will not violate any provision of the
organizational documents of the Practice or any provisions of, or result in the
acceleration of, any obligation under any mortgage, lien, lease, agreement,
rent, instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any material
restrictions of any kind to which the Practice is subject, or result in any lien
or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
<PAGE>
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and have filed with the
proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS.
Pentegra, Shareholders and Company agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall
cooperate to promptly prepare and file with the Securities Exchange Commission
("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to
be filed by Pentegra in connection with its Initial Public Offering (including
the prospectus constituting a part thereof, the "Registration Statement").
Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits
and approvals required to carry out the transactions contemplated by this
Agreement and the Company and Shareholders shall furnish all information
concerning Company and Shareholders as may be reasonable requested in connection
with any such action.
Company and Shareholder represent and warrant that none of the information
or documents supplied or to be supplied by it specifically for inclusion in the
Registration Statement, by exhibit or otherwise, will, at the time the
Registration Statement and each amendment or supplement thereto, if any, becomes
effective under the Securities Act of 1933, 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, in light of the circumstances under
which they were made, not misleading. Company and Shareholders shall be
entitled to review the Registration Statement and each amendment thereto, if
any, prior to the time each becomes effective under the Securities Act of 1933.
Company and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by Pentegra
in connection with the preparation of the Registration Statement and each
amendment or supplement thereto, or any other statement, filing, notice or
application made by or on behalf of each such party or any of its subsidiaries
to any governmental entity in connection with the transactions contemplated by
the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at or
prior to the Closing of each of the following conditions:
<PAGE>
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Company and Shareholders contained herein shall have been true and correct
in all respects when initially made and shall be true and correct in all
respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Company and Shareholders prior to
the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Company shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Company, the Business and the Assets, the results of which shall
be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service Agreement"),
in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which
Pentegra will provide management services to the Practice. Each Shareholder
shall have executed and delivered a Guaranty Agreement in substantially the form
attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder
shall, among other things, guaranty the obligations of the Practice under the
Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused
each shareholder of Company that has an existing employment agreement with
Company to have terminated his or her employment agreement with Company and
shall have executed an employment agreement ("Employment Agreement") with the
Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise
satisfactory to Company and Pentegra.
7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained
all necessary government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly
executed in form satisfactory to Pentegra and its counsel, referred to in
SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or
payables between Company and its shareholders or affiliates and Company shall
not have any liabilities, including indebtedness, guaranties and capital leases,
that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an
additional insured on their liability insurance program in accordance with
SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working
<PAGE>
capital of Company since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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.
At or prior to the date that the Registration Statement is declared effective by
the SEC, Pentegra shall have received all state securities and "Blue Sky"
permits necessary to consummate the transactions contemplated hereby. The
Pentegra Common Stock shall have been approved for listing on Nasdaq or other
exchange selected by Pentegra, subject only to official notification of
issuance.
SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Company and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Pentegra contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Company shall have received all documents, duly
executed in form satisfactory to Company and its counsel, referred to in SECTION
9.2.
8.5 SECURITIES APPROVAL. 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.
At or prior to the date that the Registration Statement is declared effective by
the SEC, Pentegra shall have received all state securities and "Blue Sky"
permits necessary to consummate the transactions contemplated hereby. The
Pentegra Common Stock shall have been approved for listing on Nasdaq or other
exchange selected by Pentegra, subject only to official notification of
issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days
after requested by Pentegra, Company and Shareholders shall deliver to Pentegra
the following, all of which shall be in a form satisfactory to counsel to
Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in
escrow pending Closing, pursuant to an escrow agreement or letter agreement in
form and substance mutually acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals of
all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
<PAGE>
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of Company
authorizing the execution, delivery and performance of this Agreement, the
Service Agreement, the Employment Agreements and all related documents and
agreements each certified by the Secretary as being true and correct copies of
the original thereof;
(d) executed merger certificate and/or plan as required by applicable
state law;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra and the original stock certificates together
with blank stock powers representing the outstanding shares of Company common
stock;
(f) certificates of the Shareholders and a duly authorized officer of
Company dated as of the Closing Date, (i) as to the truth and correctness of the
representations and warranties of Company and Shareholder contained herein; (ii)
as to the performance of and compliance by Company and Shareholder with all
covenants contained herein; and (iii) certifying that all conditions precedent
of Company and Shareholders to the Closing have been satisfied;
(g) a certificate of the Secretary of Company certifying as to the
incumbency of the directors and officers of Company and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Company;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Company and any state of required
foreign qualification of Company establishing that Company is in existence and
is in good standing to transact business in its state of incorporation;
(i) an opinion of counsel to Company and Shareholder opining as to
the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Company, the enforceability of this Agreement and the other agreements and
documents to be executed in connection herewith, and other matters reasonably
requested by Pentegra;
(j) non-foreign affidavits executed by Company;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall
deliver to Company and Shareholders, the following, all of which shall be in a
form satisfactory to counsel to Company and Shareholders and shall be held by
Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing,
pursuant to an escrow agreement or letter agreement in form and substance
mutually acceptable to the parties hereto:
(a) the Merger Consideration;
<PAGE>
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance of
this Agreement and all related documents and agreements each certified by the
Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii) certifying
that all conditions precedent of Pentegra to the Closing have been satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and the
State of incorporation of Company;
(h) an opinion of counsel to Pentegra opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Pentegra, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Company;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Company to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in
any Exhibit attached hereto, any agreement executed pursuant hereto, and any
certificate executed and delivered by any party pursuant to the terms of this
Agreement, shall constitute representations and warranties of Company and
Shareholders, jointly and severally, or of Pentegra, as the case may be. All
such representations and warranties, and all representations and warranties
expressly labeled as such in this Agreement shall survive the date of this
Agreement and the Closing Date for a period of five (5) years following the
Closing Date, except that (i) the representations and warranties with respect to
environmental and medical waste laws and health care laws and matters shall
survive for a period of fifteen (15) years and tax representations shall survive
until one year after the expiration of the applicable statute of limitations.
Each party covenants with the other parties not to make any claim with respect
to such representations and warranties, against any party after the date on
which such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless
such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4
hereof, as the case may be. Each party hereby releases, acquits and discharges
the other party from any and all claims and demands, actions and causes of
action, damages, costs, expenses and rights of setoff with respect to which the
notices required by SECTION 10.2, 10.3 or 10.4, as
<PAGE>
applicable, are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2
AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS
FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS,
COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES
AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY
PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF,
OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR
TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3
AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND
SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS,
DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND
EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH
RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
<PAGE>
HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO
BE FURNISHED BY INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER
THE CLOSING DATE,
(D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS
GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING
OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO
CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY
RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A
RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE
NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND
PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS
SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION
STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR
SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED
OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS
SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
<PAGE>
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the
defense of such action or proceeding, such Indemnified Person shall notify
Indemnitor thereof. If any such action or other proceeding shall be brought
against any Indemnified Person, Indemnitor shall, upon written notice given
within a reasonable time following receipt by Indemnitor of such notice from
Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Company or any Shareholder giving rise
to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be
entitled to offset the amount of damages incurred by it as a result of such
breach of warranty, representation, covenant or agreement against any amounts
payable by Pentegra, including the amounts payable under the Service Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Company
or any Shareholder contained in this Agreement or in any certificate or other
document executed and delivered by Company or any Shareholder pursuant to this
Agreement is or becomes untrue or breached in any material respect or if Company
or any Shareholder fails to comply in any material respect with any covenant or
agreement contained herein, and any such misrepresentation, noncompliance or
breach is not cured, waived or eliminated within twenty (20) days after receipt
of written notice thereof;
(c) at any time by Company or any Shareholder if any representation or
warranty of Pentegra contained in this Agreement or in any certificate or other
document executed and delivered by Pentegra pursuant to this Agreement is or
becomes untrue or breached in any material respect or if Pentegra fails to
comply in any material respect with any covenant or agreement contained herein
and such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra, Shareholders or Company if the transaction contemplated
hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Company, that such termination is
<PAGE>
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date,
Shareholder shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of
Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer shall
be treated as effective for any purpose or (b) engage in any transaction,
whether or not with respect to any shares of Pentegra Common Stock or any
interest therein, the intent or effect of which is to reduce the risk of owning
shares of Pentegra Common Stock. The certificates evidencing the Pentegra
Common Stock delivered to Company pursuant to the terms hereof will bear a
legend substantially in the form set forth below and containing such other
information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the
shares of Pentegra Common Stock to be delivered to Company pursuant to this
Agreement have not been and will not be registered under the Securities Act of
1933 and may not be resold without compliance with the Securities Act of 1933.
The Pentegra Common Stock to be acquired by Shareholders pursuant to this
Agreement is being acquired solely for its own account, for investment purposes
only and with no present intention of distributing, selling or otherwise
disposing of it in connection with a distribution. Each Shareholder covenants,
warrants and represents that none of the shares of Pentegra Common Stock issued
to it will be offered, sold, assigned, pledged, hypothecated, transferred or
otherwise disposed of except after full compliance with all of the applicable
provisions of the Securities Act, as amended, and the rules and regulations of
the Securities Exchange Commission and applicable state securities laws and
regulations. All certificates evidencing shares of Pentegra Common Stock shall
bear the following legend in addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Company resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the
economic risk of an investment in Pentegra Common Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and
have such knowledge and experience in financial and business matters that they
are capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect their own interests in connection with
the acquisition of the Pentegra Common Stock. Shareholders and their
representatives have had an adequate opportunity to ask questions and receive
answers from the officers of Pentegra concerning any and all matters relating to
the background and experience of the officers
<PAGE>
and directors of Pentegra, the plans for the operations of the business of
Pentegra, and any plans for additional acquisitions and the like.
Shareholders and their representatives have asked any and all questions in
the nature described in the preceding sentence and all questions have been
answered to their satisfaction. Shareholders are "accredited investors" as
defined in Regulation D of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Company and Shareholders agree that it will not disclose
such confidential information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, unless (i) such information
becomes available to or known by the public generally through no fault of
Company or Shareholders, (ii) disclosure is required by law or the order of any
governmental authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (ii), Company and Shareholders shall, if
possible, give prior written notice thereof to the other parties hereto, and
provide such other parties hereto with the opportunity to contest such
disclosure, (iii) Company and Shareholders reasonably believe that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party, or (iv) Company and Shareholders are the sole and exclusive
owner of such confidential information as a result of the transactions
contemplated hereunder or otherwise. In the event of a breach or threatened
breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra
shall be entitled to an injunction restraining Company and Shareholders from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting Pentegra from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
The obligations of the parties under this SECTION 13 shall survive the
termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement will qualify as a reorganization within the meaning of Section
368(a) of the Code. The tax returns (and schedules thereto) of Shareholders,
Company and Pentegra shall be filed in a manner consistent with such intention
and Shareholders and Pentegra shall each provide the other with such tax
information, reports, returns or schedules as may be reasonably required to
assist the other in so reporting the transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery, or by
facsimile AND overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
<PAGE>
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Company and Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this Agreement,
whether or not such transactions are consummated. Without limiting the
generality of the foregoing and whether or not such liabilities may be deemed to
have been incurred in the ordinary course of business, Pentegra shall not be
liable to or required to pay, either directly or indirectly, any fees and
expenses of legal counsel, accountants, auditors or other persons or entities
retained by Company or any Shareholder for services rendered in connection with
negotiating and closing the transactions contemplated by this Agreement or the
documents to be executed in connection herewith, whether or not such costs or
expenses are incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure, either
written or oral, regarding the transactions contemplated by this Agreement
without the prior written consent of the other party, provided that the
foregoing shall not prohibit any disclosure (a) by press release, filing or
otherwise that Pentegra has determined in good faith judgment to be required by
Federal securities laws or the rules of the National Association of Securities
Dealers, (b) to attorneys, accountants, investment bankers or other agents of
the parties assisting the parties in connection with the transactions
contemplated by this Agreement, and (c) by Pentegra in connection with the
conduct of its Initial Public Offering and conducting an examination of the
operations and assets of Company.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are
integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and not
only in connection with the specific representation in which they are explicitly
referenced.
<PAGE>
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one and the same
instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any entity
that, through one or more intermediaries is, controlled, controlled by or under
common control with, Pentegra. Upon any such assignment prior to the Closing,
all references herein to Pentegra (including those to Pentegra Common Stock)
shall be deemed to include references to the assignee and the assignee's common
stock. Notwithstanding any such assignment, Pentegra shall not, absent a
written release from Company, be relieved from its obligations to Company under
this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Company, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Company and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Company or may demand from Company, and Company agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing, and
signed by the parties hereto. The waiver of any of the terms and conditions of
this Agreement shall not be construed as a waiver of any other terms and
conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Companys or Shareholders (hereinafter referred to as a "Party"), whether made
before or after the institution of any legal proceeding, any dispute among the
parties hereto in any way arising out of, related to, or in connection with
this Agreement (hereinafter a "Dispute"), shall be resolved by binding
arbitration in accordance with the terms of this Section (hereinafter the
"Arbitration Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in accordance
with the terms of this Arbitration Program, the Commercial
<PAGE>
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been completed
and the arbitrators have determined each party's post-arbitration obligations
and responsibilities as it relates to such warranties and covenants. No
provision of, nor the exercise of any rights under, this Arbitration Program
shall limit the right of any Party at any time to seek or use ancillary or
preliminary judicial or non-judicial self help remedies for the purposes of
obtaining, perfecting, preserving, or foreclosing upon any personal property in
which there has been granted a security interest or lien by a Party in the
Documents. In Disputes involving indebtedness or other monetary obligations,
each Party agrees that the other Party may proceed against all liable persons,
jointly and severally against one or more of them, without impairing rights
against other liable persons. Nor shall a Party be required to join the
principal obligor or any other liable persons (e.g., sureties or guarantors) in
any proceeding against a particular person. A Party may release or settle with
one or more liable persons as the Party deems fit without releasing or impairing
rights to proceed against any persons not so released. All statutes of
limitation that would otherwise be applicable shall apply to any arbitration
proceeding.
The party seeking arbitration shall notify the other Party, in writing, of
that Party's desire to arbitrate a dispute; and each Party shall, within twenty
(20) days from the date such notification is received, select an arbitrator, and
those two arbitrators shall select a third arbitrator within ten (10) days
thereafter. The issues or claims in dispute shall be committed to writing,
separately stated and numbered, and each party's proposed answers or contentions
shall be signed below the questions. Failure by a party to select an arbitrator
within the prescribed time period shall serve as that Party's acquiescence and
acceptance of the other party's selection of arbitrator. The arbitrators shall
resolve all Disputes in accordance with the applicable substantive law. Any
Dispute shall be decided by a majority vote of three arbitrators, unless the
claim or amount in controversy does not exceed $100,000.00, in which case a
single arbitrator (who shall have authority to render a maximum award of
$100,000.00, including all damages of any kind, costs and fees) may decide the
Dispute. The arbitrators may grant any remedy or relief that the arbitrators
deem just and equitable and within the scope of this Arbitration Program. The
arbitrators may also grant such ancillary relief as is necessary to make
effective the award. In all arbitration proceedings the arbitrators shall make
specific and written findings of fact and conclusions of law. In all
arbitration proceedings in which the amount in controversy exceeds $100,000.00,
in the aggregate, the Parties shall have in addition to the statutory right to
seek vacation or modification of any award pursuant to applicable law, the right
to seek vacation or modification of any award that is based in whole, or in
part, on an incorrect or erroneous ruling of law by appeal to an appropriate
court having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must be
filed in a court having jurisdiction over the Dispute within 15 days from the
date the award in rendered. The arbitrators' findings of fact shall be binding
on all Parties and shall not be subject to further review except as otherwise
allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in writing
by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the
headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this
Arbitration Program shall survive any termination, amendment, or expiration of
the Documents, unless the Parties otherwise expressly agree in writing making
specific reference to this Arbitration Program. To the extent permitted by
applicable law, the arbitrator shall have the power to award recovery of all
costs and fees (including attorney's fees, administrative fees, and arbitrators'
fees) to the prevailing Party. This Arbitration Program may be amended,
changed, or modified only by a writing which specifically refers to this
Arbitration Program and which is signed by all the Parties. If any term,
covenant, condition or provision of the Arbitration Program is found to be
unlawful or invalid or unenforceable, such illegality or invalidity or
unenforceable shall not affect the legality, validity or enforceability of the
remaining parts of this Arbitration Program, and all such remaining parts hereof
shall be valid and enforceable and have full force and effect as if the illegal,
invalid or unenforceable part had not been included. Each Party agrees to keep
all Disputes and arbitration proceedings strictly confidential, except for
disclosures of information required in the
<PAGE>
ordinary course of business of the Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be found
to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect. In lieu of such
provision, there shall be added automatically as part of this Agreement, a
provision as similar in its terms to such provision as may be possible and be
legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
T.L. MULLOOLY, D.D.S., INC.
By: /s/ Thomas L. Mullooly
---------------------------------------
Thomas L. Mullooly, President
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
---------------------------------------
Its: Senior VP
---------------------------------------
/s/ Thomas L. Mullooly, D.D.S.
------------------------------------------
Thomas L. Mullooly, D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Merger Consideration
A Target Companies
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment
Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
4.16 Excluded Assets and Excluded Liabilities
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
BYRON L. NOVOSAD, D.D.S., INC.
AND
BYRON L. NOVOSAD, D.D.S.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . 3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Section 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 12
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 12
Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 13
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 13
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 13
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 14
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 14
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS . . . . . . . . . . . . . 17
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 18
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 19
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 20
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . . . 21
14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . 22
14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . 22
14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . 22
14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as
of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware
corporation ("Pentegra"), Byron L. Novosad, D.D.S., Inc. ("Contributor") and
Byron L. Novosad, D.D.S., shareholders of Contributor (referred to herein as
"Shareholder" or "Shareholders").
WITNESSETH:
WHEREAS, Contributor operates a dental practice ("Business") and Pentegra
is engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra
desires to receive from Contributor, certain assets of Contributor;
WHEREAS, Pentegra or its affiliated designee has entered into or intends to
enter into Agreements and Plans of Reorganization, Asset Contribution Agreements
and other acquisition agreements (collectively, the "Other Agreements") with
such persons or entities or the stockholders of such entities listed on EXHIBIT
A (together with Contributor, the "Target Companies");
WHEREAS, it is intended for Federal income tax purposes that the transfers
contemplated by this Agreement, the Other Agreements and Pentegra's initial
public offering ("Initial Public Offering") of shares of its common stock, par
value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange
within the meaning of Section 351 of the Internal Revenue Code of 1986, as
amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock
is consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions
contained herein, on the Closing Date, Contributor shall convey, transfer,
deliver and assign to Pentegra or any affiliate of Pentegra designated by
Pentegra all of Contributor's right, title and interest in and to those certain
assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and
collectively "Assets"), free and clear of all obligations, security interests,
claims, liens and encumbrances, except as specifically assumed, or taken subject
to, by Pentegra pursuant to SECTION 1.3(b) hereof.
<PAGE>
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and contributed hereunder, and Contributor shall retain all of its
right, title and interest in and to, the assets not specifically transferred
hereunder, including without limitation, the assets described on EXHIBIT 1.2
(the "Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Contributor
contained herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Contributor the consideration
specified in ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Contributor listed on EXHIBIT
1.3(b) attached hereto to the extent that such obligations, commitments,
liabilities and indebtedness are current and not otherwise in default. (the
"Assumed Liabilities"). Notwithstanding any contrary provision contained
herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra
assume: (i) any liability, commitment or obligation or trade payable or
indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability
set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of
or default under such contracts, leases, commitments or obligations which
occurred on or before the Closing Date; (iii) any liability for any employee
benefits payable to employees of Contributor, including, but not limited to,
liabilities arising under any Contributor Plan (as defined in SECTION 2.21
hereof); (iv) any liability based upon or arising out of a violation of any
antitrust or similar restraint-of-trade laws by any Shareholder or
Contributor, including, without limiting the generality of the foregoing, any
such antitrust liability which may arise in connection with agreements,
contracts, commitments or orders for the sale of goods or provision of
services by Contributor reflected on the books of Contributor at or prior to
the Closing Date; (v) any liability based upon or arising out of any tortious
or wrongful actions of Contributor, any licensed professional employee or
independent contractor of Contributor or any Shareholder, (vi) any liability
for the payment of any taxes of Contributor or any Shareholder, including
without limitation, sales, use and other transfer taxes and income taxes
arising from or by reason of the transactions contemplated by this Agreement;
(vii) any indebtedness secured by deeds of trust or mortgages on real
property; nor (viii) any liability incurred or to be incurred pursuant to any
malpractice or other suits or actions pending against Contributor or any
Shareholder.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement,
Contributor and Shareholders shall execute and deliver all such deeds, bills of
sale, assignments and assurances and take and do all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under the Assets in Pentegra or otherwise
to carry out this Agreement.
1.6 ENCUMBERANCE OF ASSETS. Pentegra will not encumber or sell any of
the Contributed Assets without first obtaining the prior written consent of the
Practice, with such consent not to be unreasonably withheld.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS.
Contributor and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
<PAGE>
2.1 CORPORATE EXISTENCE; GOOD STANDING. Contributor is a professional
corporation or association, as applicable, duly organized, validly existing and
in good standing under the laws of the State of Texas. Contributor has all
necessary corporate powers to own all of its assets and to carry on its business
as such business is now being conducted. Contributor does not own stock in or
control, directly or indirectly, any other corporation, association or business
organization, nor is Contributor a party to any joint venture or partnership.
The Shareholders are the sole shareholders of Contributor and own all
outstanding shares of capital stock free of all security interests, claims,
encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of
Contributor's common stock has been legally and validly issued and fully paid
and nonassessable. No shares of capital stock of Contributor are owned by
Contributor in treasury. There are no outstanding (a) bonds, debentures, notes
or other obligations the holders of which have the right to vote with the
stockholders of Contributor on any matter, (b) securities of Contributor
convertible into equity interests in Contributor, or (c) commitments, options,
rights or warrants to issue any such equity interests in Contributor, to issue
securities of Contributor convertible into such equity interests, or to redeem
any securities of Contributor. No shares of capital stock of Contributor have
been issued or disposed of in violation of the preemptive rights, rights of
first refusal or similar rights of any of Contributor's stockholders.
Contributor is not required to qualify to do business as a foreign corporation
in any other state or jurisdiction by reason of its business, properties or
activities in or relating to such other state or jurisdiction. Contributor does
not have any assets, employees or offices in any state other than the state set
forth in the first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the corporate
power to execute, deliver and perform this Agreement and all agreements and
other documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all action required by
law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to
authorize the execution, delivery and performance of this Agreement and such
related documents. Each Shareholder has the legal capacity to enter into and
perform this Agreement and the other agreements to be executed and delivered in
connection herewith. Contributor has obtained the approval of its stockholders
necessary to the consummation of the transactions contemplated herein. This
Agreement and all agreements and documents executed and delivered in connection
herewith have been, or will be as of the Closing Date, duly executed and
delivered by Contributor and Shareholders, as appropriate, and constitute or
will constitute the legal, valid and binding obligations of Contributor and
Shareholders, enforceable against Contributor and Shareholders in accordance
with their respective terms, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies. The execution and delivery of this
Agreement, and the agreements executed and delivered pursuant to this Agreement
or to be executed and delivered on the Closing Date, do not, and, subject to the
receipt of consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, violate any provision of the Articles or
Certificate of Incorporation or Bylaws of Contributor or any provisions of, or
result in the acceleration of, any obligation under any mortgage, lien, lease,
agreement, rent, instrument, order, arbitration award, judgment or decree to
which Contributor or any Shareholder is a party or by which Contributor or any
Shareholder is bound, or violate any material restrictions of any kind to which
Contributor is subject, or result in any lien or encumbrance on any of
Contributor's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets, or
waivers thereof, have been duly obtained and are in full force and effect and
are described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Contributor and Shareholders, threatened, which may result in the
revocation, cancellation or suspension, or any adverse modification, of any such
licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or
<PAGE>
filing with any governmental authority, any lender, lessor, any manufacturer
or supplier or any other person or entity is required to authorize, or is
required in connection with, the execution, delivery and performance of this
Agreement and the agreements and documents contemplated hereby on the part of
Contributor or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been declared or paid by Contributor on any of its capital stock
since the Balance Sheet Date. No repurchase of any of Contributor's capital
stock has been approved, effected or is pending, or is contemplated by
Contributor.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Contributor and all
amendments thereto have been delivered to Pentegra. The minute books of
Contributor contain accurate minutes of all meetings of and consents to actions
taken without meetings of the Board of Directors and stockholders of Contributor
since its formation. The books of account of Contributor have been kept
accurately in the ordinary course of business and the revenues, expenses, assets
and liabilities of Contributor have been properly recorded in such books.
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore
furnished Pentegra with copies of its unaudited balance sheet and related
unaudited statements of income, retained earnings and cash flows for its prior
two full fiscal years, as well as copies of its unaudited balance sheet as of
December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the
latest date thereof shall be referred to as the "Balance Sheet Date") and any
related unaudited statements of income, retained earnings, schedule of accounts
receivable, accounts payable and accrued liabilities, and cash flows for the
twelve months then ended (collectively, with the related notes thereto, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and results of operations of Contributor as of the dates and for the
periods indicated and reflect all fixed and contingent liabilities of
Contributor.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Contributor or any Shareholder leases, as lessor or lessee,
real or personal property used in operating the Business, related to the Assets
or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable
in accordance with their respective terms, and there is not under any such lease
any existing default by Contributor, as lessor or lessee, or any condition or
event of which any Shareholder or Contributor has knowledge which with notice or
lapse of time, or both, would constitute a default, in respect of which
Contributor or Shareholders have not taken adequate steps to cure such default
or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Contributor and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good, valid
and marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all encumbrances
set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to the Closing Date and evidence of
such releases of liens and claims shall be provided to Pentegra on the Closing
Date and the Assets shall not be used to satisfy such liens, claims or
encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned or
used by Contributor, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Contributor has
<PAGE>
no right, title or interest in or to patents, patent rights, corporate names,
assumed names, manufacturing processes, trade names, trademarks, service
marks, inventions, specialized treatment protocols, copyrights, formulas and
trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of
all names of all predecessor companies of Contributor, including the names of
any entities from whom Contributor previously acquired significant assets.
Except for off-the-shelf software licenses and except as set forth on EXHIBIT
2.12, Contributor is not a licensee in respect of any patents, trademarks,
service marks, trade names, copyrights or applications therefor, or
manufacturing processes, formulas or trade secrets or similar items and no
such licenses are necessary for the conduct of the Business or the use of the
Assets. No claim is pending or has been made to the effect that the Assets
or the present or past operations of Contributor in connection with the
Assets or Business infringe upon or conflict with the asserted rights of
others to any patents, patent rights, manufacturing processes, trade names,
trademarks, service marks, inventions, licenses, specialized treatment
protocols, copyrights, formulas, know-how and trade secrets. Contributor has
the sole and exclusive right to use all Assets constituting proprietary
rights without infringing or violating the rights of any third parties and no
consents of any third parties are required for the use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on
EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this
Agreement of: (a) the name of each director and officer of Contributor and the
offices held by each, (b) the most recent payroll report of Contributor, showing
all current employees of Contributor and their current levels of compensation,
(c) promised increases in compensation of employees of Contributor that have not
yet been effected, (d) oral or written employment agreements, consulting
agreements or independent contractor agreements (and all amendments thereto) to
which Contributor is a party, copies of which have been delivered to Pentegra,
and (e) all employee manuals, materials, policies, procedures and work-related
rules, copies of which have been delivered to Pentegra. Contributor is in
compliance with all applicable laws, rules, regulations and ordinances
respecting employment and employment practices. Contributor has not engaged in
any unfair labor practice. There are no unfair labor practices charges or
complaints pending or threatened against Contributor, and Contributor has never
been a party to any agreement with any union, labor organization or collective
bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Contributor nor the
Business nor any of the Assets is subject to any pending, nor does
Contributor or any Shareholder have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Contributor, any Shareholder, the Business, the
Assets or the transactions contemplated by this Agreement, and, to the
knowledge of Contributor and Shareholders, no basis for any such action
exists, nor is there any legal impediment of which Contributor or any
Shareholder has knowledge to the continued operation of its business or the
use of the Assets in the ordinary course, subject to consents set forth on
EXHIBIT 2.4.
2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Contributor ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted or may be made
by any party thereto. Except as indicated on such Exhibits, there is not
under any such Contract any existing default by Contributor or any
Shareholder, or any condition or event of which Contributor or any
Shareholder has knowledge which with notice or lapse of time, or both, would
constitute a default. Contributor and Shareholders have no knowledge of any
default by any other party to such Contracts. Contributor and Shareholders
have not received notice of the intention of any party to any Contract to
cancel or terminate any Contract and have no reason to believe that any
amendment or change to any Contract is contemplated by any party thereto.
Other than those contracts, obligations and commitments listed on EXHIBIT
2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Contributor are not a party to any
material written or oral agreement contract, lease or
<PAGE>
arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product or
service;
(h) Loan agreement or other contract for money borrowed or lent or to
be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of the
Contributor or Shareholders, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Contributor on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16,
Contributor has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) or entered into any contract, lease, license or
commitment, except in connection with the performance of this Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued, contingent
or otherwise) other than (i) liabilities shown or reflected on the Balance
Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary
course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(d) Made any payments to or loaned any money to any person or entity
other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise
<PAGE>
provided therefor, except as may have been required due to income or
operations of Contributor since the Balance Sheet Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants or
agents, or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of any officer, employee, consultant or agent;
(j) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties, assets
or business or the Business or the Assets, or experienced any other material
adverse change in its financial condition, assets, prospects, liabilities or
business;
(n) Declared or paid a distribution, payment or dividend of any kind
on the capital stock of Contributor;
(o) Repurchased, approved any repurchase or agreed to repurchase any
of Contributor's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Contributor has filed all tax returns (including tax
reports and other statements) required to have been filed by it, and has paid
all taxes (including any interest, penalty or additions thereto) required to
have been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Contributor has not received any notice that any tax deficiency or
delinquency has been or may be asserted against Contributor. There are no
audits relating to taxes of Contributor pending or in process or, to the
knowledge of Contributor, threatened. Contributor is not currently the
beneficiary of any waiver of any statute of limitations in respect of taxes nor
of any extension of time within which to file any tax return or to pay any tax
assessment or deficiency. There are no liens or encumbrances relating to taxes
on or threatened against any of the assets of Contributor. Contributor has
withheld and paid all taxes required by law to have been withheld and paid by
it. Neither Contributor nor any predecessor of Contributor is or has been a
party to any tax allocation or sharing agreement or a member of an affiliated
group of corporations filing a consolidated Federal income tax return.
Contributor has delivered to Pentegra correct and complete copies of
Contributor's three most recently filed annual state, local and Federal income
tax returns, together with all examination reports and statements of
deficiencies assessed against or agreed to by Contributor during the three
calendar year period preceding the date of this Agreement. Contributor has
neither made any payments, is obligated to make any payments, or is a party to
any agreement
<PAGE>
that under any circumstance could obligate it to make any payments that will
not be deductible under Code section 280G.
(b) Contributor does not intend to dispose of any of the shares of
Pentegra Common Stock to be received hereunder and is not a party to any plan,
arrangement or agreement for the disposition of such shares. Contributor and
Shareholders have no knowledge, after due inquiry, of any such intent, plan,
arrangement or agreement by any Shareholder. Nothing contained herein shall
prohibit Contributor from selling such shares of Pentegra Common Stock after the
designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated by
this Agreement which may be now or hereafter asserted against Pentegra,
Contributor or Contributor's shareholders resulting from any action taken by
Contributor or any Shareholder or their respective agents or employees, or any
of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against
on the Balance Sheet, Contributor did not have, as of the Balance Sheet Date,
and has not incurred since that date and will not have incurred as of the
Closing Date, any liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, other than
those incurred in the ordinary course of business or as set forth on EXHIBIT
2.16. Contributor and Shareholders do not know, or have reasonable grounds to
know, of any basis for the assertion against Contributor or any Shareholder as
of the Balance Sheet Date, of any claim or liability of any nature in any amount
not fully reflected or reserved against on the Balance Sheet, or of any claim or
liability of any nature arising since that date other than those incurred in the
ordinary course of business or contemplated by this Agreement. All indebtedness
of Contributor (including without limitation, indebtedness for borrowed money,
guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached
hereto.
2.20 INSURANCE POLICIES. Contributor, each Shareholder and each licensed
professional of Contributor carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the industry.
Valid and enforceable policies in such amounts are outstanding and duly in force
and will remain duly in force through the Closing Date. All such policies are
described in EXHIBIT 2.20 attached hereto and true and correct copies have been
delivered to Pentegra. Neither Shareholders nor Contributor have not received
notice or other communication from the issuer of any such insurance policy
cancelling or amending such policy or threatening to do so. Neither
Contributor, nor any Shareholder nor any licensed professional employee of
Contributor has any outstanding claims, settlements or premiums owed against any
insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached
hereto, Contributor has neither established, nor maintains, nor is obligated to
make contributions to or under or otherwise participate in, (a) any bonus or
other type of compensation or employment plan, program, agreement, policy,
commitment, contract or arrangement (whether or not set forth in a written
document); (b) any pension, profit-sharing, retirement or other plan, program or
arrangement; or (c) any other employee benefit plan, fund or program, including,
but not limited to, those described in SECTION 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). All such plans listed on
EXHIBIT 2.20 (individually "Contributor Plan," and collectively "Contributor
Plans") have been operated and administered in all material respects in
accordance with all applicable laws, rules and regulations, including without
limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of
the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended,
the Age Discrimination in Employment Act of 1967, as amended, and the related
rules and regulations adopted by those Federal agencies responsible for the
administration of such laws. No act or failure to act by Contributor has
resulted in a "prohibited transaction" (as defined in ERISA) with respect to the
Contributor Plans. No "reportable event" (as defined in ERISA) has occurred
with respect to any of the Contributor Plans. Contributor has not previously
made, is not currently making, and is not obligated in any
<PAGE>
way to make, any contributions to any multiemployer plan within the meaning
of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to
each Contributor Plan, either (i) the value of plan assets (including
commitments under insurance contracts) is at least equal to the value of plan
liabilities or (ii) the value of plan liabilities in excess of plan assets is
disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any charter
or other corporate restriction or any judgment, order, writ, injunction, decree,
rule or regulation that materially and adversely affects the condition
(financial or otherwise), operations, assets, liabilities, business or prospects
of Contributor, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Shareholders and
Contributor's licensed professional employees, and the conduct of the Business
and use of the Assets, have complied with all applicable laws, rules,
regulations and licensing requirements, including, without limitation, the
Federal Environmental Protection Act, the Occupational Safety and Health Act,
the Americans with Disabilities Act and any environmental laws and medical waste
laws, and there exist no violations by Contributor, any Shareholder or any
licensed professional employee of Contributor of any Federal, state or local law
or regulation. Contributor and Shareholders have not received any notice of a
violation of any Federal, state and local laws, regulations and ordinances
relating to the operations of the Business and Assets and no notice of any
pending inspection or violation of any such law, regulation or ordinance has
been received by Contributor.
2.24 THIRD PARTY PAYORS. Contributor, Shareholders and each licensed
professional employee or independent contractor of Contributor has timely
filed all claims or other reports required to be filed with respect to the
purchase of services by third-party payors, and all such claims or reports
are complete and accurate, and has no liability to any payor with respect
thereto. There are no pending appeals, overpayment determinations,
adjustments, challenges, audit, litigation or notices of intent to open
Medicare or Medicaid claim determinations or other reports required to be
filed by Contributor, any Shareholder and each licensed professional employee
of Contributor. Neither Contributor, nor any Shareholder, nor any licensed
professional employee of Contributor has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Contributor, Shareholders and Contributor's licensed professional employees
has not (a) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made
any false statement or representation of a material fact for use in
determining rights to any benefit or payment; (c) failed to disclose
knowledge of the occurrence of any event affecting the initial or continued
right to any benefit or payment on its own behalf or on behalf of another,
with the intent to fraudulently secure such benefit or payment; and (d)
violated any applicable state anti-remuneration or self-referral statutes,
rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Contributor or Shareholders in this Agreement, and no Exhibit or certificate
issued or executed by, or information furnished by, officers or directors of
Contributor or any Shareholder and furnished or to be furnished to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Contributor has with any bank or other
financial institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
<PAGE>
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Contributor, or their respective spouses,
children or affiliates, owns directly or indirectly, on an individual or joint
basis, any interest in, has a compensation or other financial arrangement with,
or serves as an officer or director of, any customer or supplier or competitor
of Contributor or any organization that has a material contract or arrangement
with Contributor.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of
the names and addresses of each payor of Contributor's services which accounted
for more than 10% of revenues of Contributor in the preceding fiscal year.
Contributor has good relations with all such payors and other material payors of
Contributor and none of such payors has notified Contributor that it intends to
discontinue its relationship with Contributor or to deny any claims submitted to
such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Contributor and Shareholders as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions required
by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize
the execution, delivery and performance of this Agreement and such related
documents. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing Date,
duly executed and delivered by Pentegra and constitute or will constitute the
legal, valid and binding obligations of Pentegra, enforceable against Pentegra
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and delivery
of this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and, the
consummation of the actions contemplated hereby will not, violate any provision
of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or decree
to which Pentegra is a party or by which Pentegra is bound, or violate any
material restrictions of any kind to which Pentegra is subject, or result in any
lien or encumbrance on any of Pentegra's assets. Other than as have been
obtained or as would not have a material adverse effect, there are no consents
of any person or entity required for the transaction contemplated hereby on
behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Pentegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would not
have a material adverse effect, there are no proceedings pending or, to the
knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses or
permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any pending,
nor does Pentegra have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting
<PAGE>
Pentegra, its business, assets or the transactions contemplated by this
Agreement, and, to the knowledge of Pentegra, no basis for any such action
exists, nor is there any legal impediment of which Pentegra has knowledge to
the continued operation of its business or the use of its Assets in the
ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports and
other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it, other than as would not have a material adverse effect. Pentegra
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Pentegra. There are no audits relating to taxes of
Pentegra pending or in process or, to the knowledge of Pentegra, threatened.
Pentegra is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra
in this Agreement, and no Exhibit or certificate issued by officers or directors
of Pentegra and furnished or to be furnished to Contributor or any Shareholder
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
SECTION 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS.
Contributor and Shareholders, jointly and severally, agree that between the
date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Shareholders
shall use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Contributor
and Shareholders agree to complete the Exhibits hereto to be provided by them in
form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Contributor and Shareholders shall operate the
Business and use the Assets in the ordinary course. Contributor and
Shareholders shall not enter into any lease, contract, indebtedness, commitment,
purchase or sale or acquire or dispose of any capital asset relating to the
Business or the Assets except in the ordinary course of business. Contributor
and Shareholders shall use their best efforts to preserve the Business and
Assets intact and shall not take any action that would have an adverse effect on
the Business or Assets. Contributor and Shareholders shall use their best
efforts to preserve intact the relationships with payors, customers, suppliers,
patients and others having significant business relations with Contributor.
Contributor and Shareholders shall collect its receivables and pay its trade
payables in the ordinary course of business. Contributor and Shareholders shall
not introduce any new method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Contributor and Shareholders shall permit Pentegra
and its authorized
<PAGE>
representatives access to, and make available for inspection, all of the
assets and business of Contributor, the Business and the Assets, including
employees, customers and suppliers and permit Pentegra and its authorized
representatives to inspect and make copies of all documents, records and
information with respect to the business or assets of Contributor, the
Business or the Assets as Pentegra or its representatives may request.
Contributor and Shareholders shall promptly notify Pentegra in writing of (a)
any notice or communication relating to a default or event that, with notice
or lapse of time or both, could become a default, under any contract,
commitment or obligation to which Contributor is a party or relating to the
Business or the Assets, and (b) any adverse change in Contributor's or the
Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor and
Shareholders shall use their best efforts to secure all necessary approvals and
consents of third parties to the consummation of the transactions contemplated
hereby, including consents described on EXHIBIT 2.4. Contributor and
Shareholders shall use their best efforts to obtain all licenses, permits,
approvals or other authorizations required under any law, rule, regulation, or
otherwise to provide the services of Contributor contemplated by the Service
Agreement and to conduct the intended business of Contributor and operate the
Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of Closing or the termination of this Agreement in accordance with the
provisions hereof, Contributor and Shareholders shall not, and shall use its
best efforts to cause Contributor's employees, agents and representatives not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer, including without limitation,
any proposal or offer to any Shareholder, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of Contributor or
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to such proposal
or offer, and Contributor and Shareholders will immediately cease any such
activities, discussions or negotiations heretofore conducted with respect to any
of the foregoing. Contributor and Shareholders shall immediately notify
Pentegra if any such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby covenants
and agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Contributor or any entity might have any liability whatsoever
arising from any insurance, pension plan, employment tax or similar liability
of Contributor to any employee or other person or entity (including, without
limitation, any Contributor Plan and any liability under employment contracts
with Contributor) allocable to services performed prior to the Closing Date.
Contributor and Shareholders acknowledge that the purpose and intent of this
covenant is to assure that Pentegra shall have no unfunded liability whatsoever
at any time after the Closing Date with respect to any of Contributor's
employees or similar persons or entities, including, without limitation, any
Contributor Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of any Shareholder (other than in the ordinary course of business) or other
employee or an independent contractor of Contributor, adopt, amend or terminate
any compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect upon Contributor, its business, assets or
prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Contributor, nor will any repurchase of
any of Contributor's capital stock be approved or
<PAGE>
effected.
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Shareholders
shall use their best efforts to take, or cause to be taken, all actions
necessary to effect the acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Contributor and Shareholders will not
change in any material respect the tax or financial accounting methods or
practices followed by Contributor (including any material change in any
assumption underlying, or any method of calculating, any bad debt, contingency
or other reserve), except as may be required by law or generally accepted
accounting principles. Contributor and Shareholders will duly, accurately and
timely (without regard to any extensions of time) file all returns, information
statements and other documents relating to taxes of Contributor required to be
filed by it, and pay all taxes required to be paid by it, on or before the
Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Contributor hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Contributor and Shareholders covenant and agree that all of the
creditors with respect to the Business and the Assets will be paid in full by
Contributor prior to the Closing Date, except to extent that any liability to
such creditors is assumed by Pentegra pursuant to this Agreement. If required
by Pentegra, Contributor and Shareholders shall furnish Pentegra with proof of
payment of all creditors with respect to the Business and the Assets.
Notwithstanding the foregoing, Contributor and Shareholders may dispute the
validity or amount of any such creditor's claim without being deemed to be in
violation of this SECTION 4.11, provided that such dispute is in good faith and
does not unreasonably delay the resolution of the claim and provided, further
that Contributor and Shareholders agree to indemnify and bond Pentegra for such
amounts as is satisfactory to Pentegra.
4.12 LEASE. If Contributor leases any of its premises from any Shareholder
or other affiliate of Contributor or any shareholder of Contributor, Pentegra
shall have entered into a building lease (the "Building Lease") with the owner
of such premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, (i) a five year initial
term plus three five-year renewal options, (ii) a lease rate equal to the fair
market value lease rate, as agreed to by Pentegra, and (iii) such other
provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Contributor and Shareholders shall cooperate
with all requests made by Pentegra for the purpose of allowing Pentegra to hire
those non-dental employees of Contributor designated by Pentegra, such
employment to be effective as of the Closing Date. Notwithstanding the above,
Contributor and Shareholders shall remain liable under any Contributor Plans for
any claims incurred by any employees or their spouses or dependents, and for all
compensation, bonuses, benefits and other such items and other liabilities
related to Contributor's employees incurred by Contributor prior to the Closing
Date.
4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges that all
employees of Contributor hired by Pentegra pursuant to SECTION 4.13 above,
shall be treated as "leased employees" (as defined in Code Section 414(n)) of
Contributor and shall be treated as Clinic employees for purposes of eligibility
and participation in Contributor Plans.
4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective as
of the Closing Date.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
<PAGE>
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS.
Pentegra, Shareholders and Contributor agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Contributor and Shareholders
shall cooperate to promptly prepare and file with the Securities Exchange
Commission ("SEC") the Registration Statement on Form S-1 (or other
appropriate Form) to be filed by Pentegra in connection with its Initial
Public Offering (including the prospectus constituting a part thereof, the
"Registration Statement"). Pentegra shall obtain all necessary state
securities laws or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement and the Contributor and
Shareholders shall furnish all information concerning Contributor and
Shareholders as may be reasonable requested in connection with any such
action.
Contributor and Shareholder represent and warrant that none of the
information or documents supplied or to be supplied by it specifically for
inclusion in the Registration Statement, by exhibit or otherwise, will, at
the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act of 1933, 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, in
light of the circumstances under which they were made, not misleading.
Contributor and Shareholders shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.
Contributor and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by
Pentegra in connection with the preparation of the Registration Statement and
each amendment or supplement thereto, or any other statement, filing, notice
or application made by or on behalf of each such party or any of its
subsidiaries to any governmental entity in connection with the transactions
contemplated by the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Contributor and Shareholders contained herein shall have been true and
correct in all respects when initially made and shall be true and correct in
all respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Contributor and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Contributor and Shareholders
prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have
<PAGE>
been threatened orally or in writing, asserted, instituted or entered to
restrain or prohibit the carrying out of the transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Contributor shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Contributor, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and Pentegra
shall have executed and delivered a Service Agreement (the "Service
Agreement"), in substantially the form attached hereto as EXHIBIT 7.7,
pursuant to which Pentegra will provide management services to the
Contributor. Each Shareholder shall have executed and delivered a Guaranty
Agreement in substantially the form attached as EXHIBIT 4.10 of the Service
Agreement pursuant to which Shareholder shall, among other things, guaranty
the obligations of Contributor under the Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated, and
caused each shareholder of Contributor that has an existing employment
agreement with Contributor to have terminated his or her employment agreement
with Contributor and shall have executed an employment agreement ("Employment
Agreement") with Contributor in form and substance attached hereto as EXHIBIT
7.8 and otherwise satisfactory to Contributor and Pentegra.
7.9 CONSENTS AND APPROVALS. Contributor and Shareholders shall have
obtained all necessary government and other third-party approvals and
consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables
or payables between Contributor and its shareholders or affiliates and
Contributor shall not have any liabilities, including indebtedness,
guaranties and capital leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Contributor and Shareholders shall have named Pentegra
as an additional insured on their liability insurance program in accordance
with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Contributor since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
<PAGE>
SECTION 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Contributor and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pentegra contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Contributor shall have received all documents,
duly executed in form satisfactory to Contributor and its counsel, referred
to in SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. Within five business
days after requested by Pentegra, Contributor and Shareholders shall deliver
to Pentegra the following, all of which shall be in a form satisfactory to
counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel
for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or
letter agreement in form and substance mutually acceptable to the parties
hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of
Contributor authorizing the execution, delivery and performance of this
Agreement, the Service Agreement, the Employment Agreements and all related
documents and agreements each certified by the Secretary as being true and
correct copies of the original thereof;
(d) a bill of sale conveying the Assets to Pentegra;
<PAGE>
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(f) certificates of the Shareholders and a duly authorized officer
of Contributor dated as of the Closing Date, (i) as to the truth and
correctness of the representations and warranties of Contributor and
Shareholder contained herein; (ii) as to the performance of and compliance by
Contributor and Shareholder with all covenants contained herein; and (iii)
certifying that all conditions precedent of Contributor and Shareholders to
the Closing have been satisfied;
(g) a certificate of the Secretary of Contributor certifying as to
the incumbency of the directors and officers of Contributor and as to the
signatures of such directors and officers who have executed documents
delivered at the Closing on behalf of Contributor;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Contributor and any state of
required foreign qualification of Contributor establishing that Contributor
is in existence and is in good standing to transact business in its state of
incorporation;
(i) an opinion of counsel to Contributor and Shareholder opining as
to the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Contributor, the enforceability of this Agreement and the other agreements
and documents to be executed in connection herewith, and other matters
reasonably requested by Pentegra;
(j) non-foreign affidavits executed by Contributor;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Contributor, in substantially the form attached hereto as EXHIBIT 9.1(L) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Contributor and Shareholder, the following, all of which
shall be in a form satisfactory to counsel to Contributor and Shareholders
and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in
escrow pending Closing, pursuant to an escrow agreement or letter agreement
in form and substance mutually acceptable to the parties hereto:
(a) the Acquisition Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
<PAGE>
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Contributor;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, and
other matters reasonably requested by Contributor;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Contributor to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit attached hereto, any agreement executed pursuant hereto, and
any certificate executed and delivered by any party pursuant to the terms of
this Agreement, shall constitute representations and warranties of
Contributor and Shareholders, jointly and severally, or of Pentegra, as the
case may be. All such representations and warranties, and all
representations and warranties expressly labeled as such in this Agreement
shall survive the date of this Agreement and the Closing Date for a period of
five (5) years following the Closing Date, except that (i) the
representations and warranties with respect to environmental and medical
waste laws and health care laws and matters shall survive for a period of
fifteen (15) years and tax representations shall survive until one year after
the expiration of the applicable statute of limitations. Each party covenants
with the other parties not to make any claim with respect to such
representations and warranties, against any party after the date on which
such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof,
unless such party has timely given the notice required in SECTION 10.2, 10.3
or 10.4 hereof, as the case may be. Each party hereby releases, acquits and
discharges the other party from any and all claims and demands, actions and
causes of action, damages, costs, expenses and rights of setoff with respect
to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable,
are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD CONTRIBUTOR AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES
(EACH OF THE FOREGOING, INCLUDING CONTRIBUTOR AND SHAREHOLDERS, FOR PURPOSES
OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN
"INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES,
LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING,
BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH
APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM:
<PAGE>
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. CONTRIBUTOR AND
SHAREHOLDERS (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT
APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL
INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS,
SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND
EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR
WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER, AND
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS WHETHER ON OR
AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY CONTRIBUTOR OR ITS SHAREHOLDERS OR THEIR
<PAGE>
CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE
OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR
OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE CONTRIBUTOR OR
SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER
ON OR AFTER THE CLOSING DATE,
(E) TAXES OF CONTRIBUTOR OR ANY SHAREHOLDER OR ANY OTHER PERSON OR
ENTITY RELATED TO OR AFFILIATED WITH THE CONTRIBUTOR OR SHAREHOLDER ARISING
FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF CONTRIBUTOR OR THE SHAREHOLDERS FOR COSTS AND
EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN
CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN
CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS
SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE CONTRIBUTOR OR
ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS,
THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
CONTRIBUTOR OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO
MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the
defense of such action or proceeding, such Indemnified Person shall notify
Indemnitor thereof. If any such action or other proceeding shall be brought
against any Indemnified Person, Indemnitor shall, upon written notice given
within a reasonable time following receipt by Indemnitor of such notice from
Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from
<PAGE>
or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Contributor or any Shareholder
giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof,
Pentegra shall be entitled to offset the amount of damages incurred by it as
a result of such breach of warranty, representation, covenant or agreement
against any amounts payable by Pentegra, including the amounts payable under
the Service Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of
Contributor or Shareholder contained in this Agreement or in any certificate
or other document executed and delivered by Contributor or any Shareholder
pursuant to this Agreement is or becomes untrue or breached in any material
respect or if Contributor or any Shareholder fails to comply in any material
respect with any covenant or agreement contained herein, and any such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;
(c) at any time by Contributor or any Shareholder if any representation
or warranty of Pentegra contained in this Agreement or in any certificate or
other document executed and delivered by Pentegra pursuant to this Agreement
is or becomes untrue or breached in any material respect or if Pentegra fails
to comply in any material respect with any covenant or agreement contained
herein and such misrepresentation, noncompliance or breach is not cured,
waived or eliminated within twenty (20) days after receipt of written notice
thereof;
(d) by Pentegra, Shareholders or Contributor if the transaction
contemplated hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Contributor, that such termination
is desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Contributor shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares
of Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer
shall be treated as effective for any purpose or (b) engage in any
transaction, whether or not with respect to any shares of Pentegra Common
Stock or any interest therein, the intent or effect of which is to reduce the
risk of owning shares of Pentegra Common Stock. The certificates evidencing
<PAGE>
the Pentegra Common Stock delivered to Contributor pursuant to the terms
hereof will bear a legend substantially in the form set forth below and
containing such other information as Pentegra may deem necessary or
appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be
required to give effect to any attempted voluntary sale, assignment,
exchange, transfer, encumbrance, pledge, distribution, appointment or
other disposition prior to _________ [date that is one year from the
Closing Date]. Upon the written request of the holder of this
certificate, the issuer agrees to remove this restrictive legend
(and any stop order placed with the transfer agent) after the date
specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Shareholders
acknowledge that the shares of Pentegra Common Stock to be delivered to
Contributor pursuant to this Agreement have not been and will not be
registered under the Securities Act of 1933 and may not be resold without
compliance with the Securities Act of 1933. The Pentegra Common Stock to be
acquired by Contributor pursuant to this Agreement is being acquired solely
for its own account, for investment purposes only and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution. Contributor covenants, warrants and represents that
none of the shares of Pentegra Common Stock issued to it will be offered,
sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
except after full compliance with all of the applicable provisions of the
Securities Act, as amended, and the rules and regulations of the Securities
Exchange Commission and applicable state securities laws and regulations.
All certificates evidencing shares of Pentegra Common Stock shall bear the
following legend in addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the
Securities Act of 1933 (the "Act") and may only be sold or otherwise
transferred if the holder hereof complies with the Act and applicable
securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock
shall bear any legend required by the securities or blue sky laws of any
state where Contributor resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Shareholders are
able to bear the economic risk of an investment in Pentegra Common Stock
acquired pursuant to this Agreement and can afford to sustain a total loss of
such investment and have such knowledge and experience in financial and
business matters that they are capable of evaluating the merits and risks of
the proposed investment and therefore have the capacity to protect their own
interests in connection with the acquisition of the Pentegra Common Stock.
Contributor, Shareholders and their representatives have had an adequate
opportunity to ask questions and receive answers from the officers of
Pentegra concerning any and all matters relating to the background and
experience of the officers and directors of Pentegra, the plans for the
operations of the business of Pentegra, and any plans for additional
acquisitions and the like. Contributor, Shareholders and their
representatives have asked any and all questions in the nature described in
the preceding sentence and all questions have been answered to their
satisfaction. Contributor and Shareholders are "accredited investors" as
defined in Regulation D of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Contributor and Shareholders agree that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally
through no fault of Contributor or Shareholders, (ii)
<PAGE>
disclosure is required by law or the order of any governmental authority
under color of law, provided, that prior to disclosing any information
pursuant to this clause (ii), Contributor and Shareholders shall, if
possible, give prior written notice thereof to the other parties hereto, and
provide such other parties hereto with the opportunity to contest such
disclosure, (iii) Contributor and Shareholders reasonably believe that such
disclosure is required in connection with the defense of a lawsuit against
the disclosing party, or (iv) Contributor and Shareholders are the sole and
exclusive owner of such confidential information as a result of the
transactions contemplated hereunder or otherwise. In the event of a breach
or threatened breach by Contributor or Shareholders of the provisions of this
SECTION 13, Pentegra shall be entitled to an injunction restraining
Contributor and Shareholders from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
Pentegra from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages. The obligations of the
parties under this SECTION 13 shall survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement, together with the transactions contemplated by the Other
Agreement and the Initial Public Offering, will qualify as an exchange
meeting the requirements of Section 351 of the Code. The tax returns (and
schedules thereto) of Shareholders, Contributor and Pentegra shall be filed
in a manner consistent with such intention and Contributor and Pentegra shall
each provide the other with such tax information, reports, returns or
schedules as may be reasonably required to assist the other in so reporting
the transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Contributor or Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
<PAGE>
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Contributor or any Shareholder for
services rendered in connection with negotiating and closing the transactions
contemplated by this Agreement or the documents to be executed in connection
herewith, whether or not such costs or expenses are incurred before or after
the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Contributor.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF
CONTRIBUTOR AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS
PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one
<PAGE>
and the same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Contributor, be relieved from its
obligations to Contributor under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Contributor, on the other hand, file suit in any court against any
other party to enforce the terms of this Agreement against the other party or
to obtain performance by it hereunder, the prevailing party will be entitled
to recover all reasonable costs, including reasonable attorneys' fees, from
the other party as part of any judgment in such suit. The term "prevailing
party" shall mean the party in whose favor final judgment after appeal (if
any) is rendered with respect to the claims asserted in the Complaint.
"Reasonable attorneys' fees" are those reasonable attorneys' fees actually
incurred in obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at
Closing a pro rata portion of all taxes levied upon the Assets for the
calendar year in which the Closing occurs. Such taxes shall be estimated,
apportioned and pro-rated among Contributor and Pentegra as of the Closing
Date, and the prorated amount due Pentegra shall be credited to the cash
portion of the Purchase Consideration. Upon payment by Pentegra of such
taxes actually assessed and paid on the Assets, Pentegra shall calculate the
apportionment of such taxes and shall pay Contributor or may demand from
Contributor, and Contributor agrees to pay, the amount necessary to correct
the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Contributors or Shareholders (hereinafter referred to as a "Party"), whether
made before or after the institution of any legal proceeding, any dispute
among the parties hereto in any way arising out of, related to, or in
connection with this Agreement (hereinafter a "Dispute"), shall be resolved
by binding arbitration in accordance with the terms of this Section
(hereinafter the "Arbitration Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or
<PAGE>
foreclosing upon any personal property in which there has been granted a
security interest or lien by a Party in the Documents. In Disputes involving
indebtedness or other monetary obligations, each Party agrees that the other
Party may proceed against all liable persons, jointly and severally against
one or more of them, without impairing rights against other liable persons.
Nor shall a Party be required to join the principal obligor or any other
liable persons (e.g., sureties or guarantors) in any proceeding against a
particular person. A Party may release or settle with one or more liable
persons as the Party deems fit without releasing or impairing rights to
proceed against any persons not so released. All statutes of limitation that
would otherwise be applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoenix,
Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or by
applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
<PAGE>
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
Byron L. Novosad, D.D.S., Inc.
By: /s/ Byron L. Novosad, D.D.S.
-----------------------------------------
Its: President
-----------------------------------------
PENTEGRA DENTAL GROUP, INC.
By: /s/ James L. Dunn, Jr.
-----------------------------------------
Its: Senior Vice President
-----------------------------------------
/s/ Byron L. Novosad, D.D.S.
--------------------------------------------
Byron L. Novosad, D.D.S.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
</TABLE>
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
RANDY O'BRIEN, D.D.S., INC.
AND
RANDY O'BRIEN, D.D.S.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . 3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Section 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 12
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 12
Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 13
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 13
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 13
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 14
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 14
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS . . . . . . . . . . . . . 17
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 18
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 19
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 20
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . . . 21
14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . 22
14.12 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.13 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.14 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.15 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.16 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed
as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra"), Randy O'Brien, D.D.S., Inc.
("Contributor") and Randy O'Brien, D.D.S., shareholders of Contributor
(referred to herein as "Shareholder" or "Shareholders").
WITNESSETH:
WHEREAS, Contributor operates a dental practice ("Business") and Pentegra
is engaged in the business of managing certain non-dentistry aspects of
dental practices;
WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra
desires to receive from Contributor, certain assets of Contributor;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Contributor, the "Target
Companies");
WHEREAS, it is intended for Federal income tax purposes that the
transfers contemplated by this Agreement, the Other Agreements and Pentegra's
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an
exchange within the meaning of Section 351 of the Internal Revenue Code of
1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock
is consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions
contained herein, on the Closing Date, Contributor shall convey, transfer,
deliver and assign to Pentegra or any affiliate of Pentegra designated by
Pentegra all of Contributor's right, title and interest in and to those certain
assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and
collectively "Assets"), free and clear of all obligations, security interests,
claims, liens and encumbrances, except as specifically assumed, or taken subject
to, by Pentegra pursuant to SECTION 1.3(b) hereof.
<PAGE>
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and contributed hereunder, and Contributor shall retain all of
its right, title and interest in and to, the assets not specifically
transferred hereunder, including without limitation, the assets described on
EXHIBIT 1.2 (the "Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Contributor
contained herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Contributor the consideration specified in
ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or discharge
on or after the Closing Date, the contracts, leases, obligations, commitments,
liabilities and indebtedness of Contributor listed on EXHIBIT 1.3(b) attached
hereto to the extent that such obligations, commitments, liabilities and
indebtedness are current and not otherwise in default. (the "Assumed
Liabilities"). Notwithstanding any contrary provision contained herein,
Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i)
any liability, commitment or obligation or trade payable or indebtedness not
specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on
EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under
such contracts, leases, commitments or obligations which occurred on or before
the Closing Date; (iii) any liability for any employee benefits payable to
employees of Contributor, including, but not limited to, liabilities arising
under any Contributor Plan (as defined in SECTION 2.21 hereof); (iv) any
liability based upon or arising out of a violation of any antitrust or similar
restraint-of-trade laws by any Shareholder or Contributor, including, without
limiting the generality of the foregoing, any such antitrust liability which may
arise in connection with agreements, contracts, commitments or orders for the
sale of goods or provision of services by Contributor reflected on the books of
Contributor at or prior to the Closing Date; (v) any liability based upon or
arising out of any tortious or wrongful actions of Contributor, any licensed
professional employee or independent contractor of Contributor or any
Shareholder, (vi) any liability for the payment of any taxes of Contributor or
any Shareholder, including without limitation, sales, use and other transfer
taxes and income taxes arising from or by reason of the transactions
contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust
or mortgages on real property; nor (viii) any liability incurred or to be
incurred pursuant to any malpractice or other suits or actions pending against
Contributor or any Shareholder.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement,
Contributor and Shareholders shall execute and deliver all such deeds, bills of
sale, assignments and assurances and take and do all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under the Assets in Pentegra or otherwise
to carry out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS.
Contributor and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Contributor is a professional
corporation or association, as applicable, duly organized, validly existing and
in good standing under the laws of the State of Texas. Contributor has all
necessary corporate powers to own all of its assets and to carry on its business
as such business is now being conducted. Contributor does not own stock in or
control, directly or indirectly,
<PAGE>
any other corporation, association or business organization, nor is
Contributor a party to any joint venture or partnership. The Shareholders are
the sole shareholders of Contributor and own all outstanding shares of
capital stock free of all security interests, claims, encumbrances and liens
in the amounts set forth on EXHIBIT 2.1. Each share of Contributor's common
stock has been legally and validly issued and fully paid and nonassessable.
No shares of capital stock of Contributor are owned by Contributor in
treasury. There are no outstanding (a) bonds, debentures, notes or other
obligations the holders of which have the right to vote with the stockholders
of Contributor on any matter, (b) securities of Contributor convertible into
equity interests in Contributor, or (c) commitments, options, rights or
warrants to issue any such equity interests in Contributor, to issue
securities of Contributor convertible into such equity interests, or to
redeem any securities of Contributor. No shares of capital stock of
Contributor have been issued or disposed of in violation of the preemptive
rights, rights of first refusal or similar rights of any of Contributor's
stockholders. Contributor is not required to qualify to do business as a
foreign corporation in any other state or jurisdiction by reason of its
business, properties or activities in or relating to such other state or
jurisdiction. Contributor does not have any assets, employees or offices in
any state other than the state set forth in the first sentence of this
SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the corporate
power to execute, deliver and perform this Agreement and all agreements and
other documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all action required by
law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to
authorize the execution, delivery and performance of this Agreement and such
related documents. Each Shareholder has the legal capacity to enter into and
perform this Agreement and the other agreements to be executed and delivered in
connection herewith. Contributor has obtained the approval of its stockholders
necessary to the consummation of the transactions contemplated herein. This
Agreement and all agreements and documents executed and delivered in connection
herewith have been, or will be as of the Closing Date, duly executed and
delivered by Contributor and Shareholders, as appropriate, and constitute or
will constitute the legal, valid and binding obligations of Contributor and
Shareholders, enforceable against Contributor and Shareholders in accordance
with their respective terms, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies. The execution and delivery of this
Agreement, and the agreements executed and delivered pursuant to this Agreement
or to be executed and delivered on the Closing Date, do not, and, subject to the
receipt of consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, violate any provision of the Articles or
Certificate of Incorporation or Bylaws of Contributor or any provisions of, or
result in the acceleration of, any obligation under any mortgage, lien, lease,
agreement, rent, instrument, order, arbitration award, judgment or decree to
which Contributor or any Shareholder is a party or by which Contributor or any
Shareholder is bound, or violate any material restrictions of any kind to which
Contributor is subject, or result in any lien or encumbrance on any of
Contributor's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets, or
waivers thereof, have been duly obtained and are in full force and effect and
are described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Contributor and Shareholders, threatened, which may result in the
revocation, cancellation or suspension, or any adverse modification, of any such
licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Contributor or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been
<PAGE>
declared or paid by Contributor on any of its capital stock since the Balance
Sheet Date. No repurchase of any of Contributor's capital stock has been
approved, effected or is pending, or is contemplated by Contributor.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Contributor and all
amendments thereto have been delivered to Pentegra. The minute books of
Contributor contain accurate minutes of all meetings of and consents to actions
taken without meetings of the Board of Directors and stockholders of Contributor
since its formation. The books of account of Contributor have been kept
accurately in the ordinary course of business and the revenues, expenses, assets
and liabilities of Contributor have been properly recorded in such books.
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore
furnished Pentegra with copies of its unaudited balance sheet and related
unaudited statements of income, retained earnings and cash flows for its prior
two full fiscal years, as well as copies of its unaudited balance sheet as of
December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the
latest date thereof shall be referred to as the "Balance Sheet Date") and any
related unaudited statements of income, retained earnings, schedule of accounts
receivable, accounts payable and accrued liabilities, and cash flows for the
twelve months then ended (collectively, with the related notes thereto, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and results of operations of Contributor as of the dates and for the
periods indicated and reflect all fixed and contingent liabilities of
Contributor.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Contributor or any Shareholder leases, as lessor or lessee,
real or personal property used in operating the Business, related to the Assets
or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable
in accordance with their respective terms, and there is not under any such lease
any existing default by Contributor, as lessor or lessee, or any condition or
event of which any Shareholder or Contributor has knowledge which with notice or
lapse of time, or both, would constitute a default, in respect of which
Contributor or Shareholders have not taken adequate steps to cure such default
or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Contributor and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good, valid
and marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all encumbrances
set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to the Closing Date and evidence of
such releases of liens and claims shall be provided to Pentegra on the Closing
Date and the Assets shall not be used to satisfy such liens, claims or
encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned or
used by Contributor, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Contributor has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT
2.12 is a listing of all names of all predecessor companies of Contributor,
including the names of any entities from whom Contributor previously acquired
significant assets. Except for off-the-shelf software licenses and except as
set forth on EXHIBIT 2.12, Contributor is not a licensee in respect of any
patents, trademarks, service marks, trade names, copyrights or
<PAGE>
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Contributor
in connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Contributor has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on
EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this
Agreement of: (a) the name of each director and officer of Contributor and the
offices held by each, (b) the most recent payroll report of Contributor, showing
all current employees of Contributor and their current levels of compensation,
(c) promised increases in compensation of employees of Contributor that have not
yet been effected, (d) oral or written employment agreements, consulting
agreements or independent contractor agreements (and all amendments thereto) to
which Contributor is a party, copies of which have been delivered to Pentegra,
and (e) all employee manuals, materials, policies, procedures and work-related
rules, copies of which have been delivered to Pentegra. Contributor is in
compliance with all applicable laws, rules, regulations and ordinances
respecting employment and employment practices. Contributor has not engaged in
any unfair labor practice. There are no unfair labor practices charges or
complaints pending or threatened against Contributor, and Contributor has never
been a party to any agreement with any union, labor organization or collective
bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Contributor nor the
Business nor any of the Assets is subject to any pending, nor does Contributor
or any Shareholder have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Contributor, any Shareholder, the Business, the Assets or the
transactions contemplated by this Agreement, and, to the knowledge of
Contributor and Shareholders, no basis for any such action exists, nor is there
any legal impediment of which Contributor or any Shareholder has knowledge to
the continued operation of its business or the use of the Assets in the ordinary
course, subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts, obligations
and commitments of Contributor ("Contracts"), entered into in connection with
and related to the Assets or the Business, all of which are listed or
incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13
(in the case of employment agreements) and EXHIBIT 2.15 (in the case of
Contracts other than leases) attached hereto. Except as otherwise indicated on
such Exhibits, all of such Contracts are valid, binding and enforceable in
accordance with their terms and are in full force and effect, and no defenses,
offsets or counterclaims have been asserted or may be made by any party thereto.
Except as indicated on such Exhibits, there is not under any such Contract any
existing default by Contributor or any Shareholder, or any condition or event of
which Contributor or any Shareholder has knowledge which with notice or lapse of
time, or both, would constitute a default. Contributor and Shareholders have
no knowledge of any default by any other party to such Contracts. Contributor
and Shareholders have not received notice of the intention of any party to any
Contract to cancel or terminate any Contract and have no reason to believe that
any amendment or change to any Contract is contemplated by any party thereto.
Other than those contracts, obligations and commitments listed on EXHIBIT 2.8,
EXHIBIT 2.13 and EXHIBIT 2.15, Contributor are not a party to any material
written or oral agreement contract, lease or arrangement, including without
limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
<PAGE>
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor or
lessee;
(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;
(g) Agreement for the purchase from a supplier of all or substantially all
of the requirements of the Business of a particular product or service;
(h) Loan agreement or other contract for money borrowed or lent or to be
borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of the
Contributor or Shareholders, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Contributor on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16,
Contributor has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) or entered into any contract, lease, license or
commitment, except in connection with the performance of this Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or paid or
satisfied any material obligation or liability (absolute, accrued, contingent or
otherwise) other than (i) liabilities shown or reflected on the Balance Sheet,
(ii) liabilities incurred since the Balance Sheet Date in the ordinary course of
business;
(c) Formed or acquired or disposed of any interest in any corporation,
partnership, joint venture or other entity;
(d) Made any payments to or loaned any money to any person or entity other
than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier that
has or may have, individually or in the aggregate, a material adverse effect on
the Business;
(f) Increased or established any reserve for taxes or any other liability
on its books or otherwise provided therefor, except as may have been required
due to income or operations of Contributor since the Balance Sheet Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
<PAGE>
(h) Sold or contracted to sell or transferred or contracted to transfer
any of the Assets or any other assets used in the conduct of the Business,
canceled any debts or claims or waived any rights, except in the ordinary
course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants or
agents, or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of any officer, employee, consultant or agent;
(j) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting any of its properties, assets or
business or the Business or the Assets, or experienced any other material
adverse change in its financial condition, assets, prospects, liabilities or
business;
(n) Declared or paid a distribution, payment or dividend of any kind on
the capital stock of Contributor;
(o) Repurchased, approved any repurchase or agreed to repurchase any of
Contributor's capital stock; or
(p) Suffered any material adverse change in the Business or to the Assets.
2.17 TAXES. (a) Contributor has filed all tax returns (including tax
reports and other statements) required to have been filed by it, and has paid
all taxes (including any interest, penalty or additions thereto) required to
have been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Contributor has not received any notice that any tax deficiency or
delinquency has been or may be asserted against Contributor. There are no
audits relating to taxes of Contributor pending or in process or, to the
knowledge of Contributor, threatened. Contributor is not currently the
beneficiary of any waiver of any statute of limitations in respect of taxes nor
of any extension of time within which to file any tax return or to pay any tax
assessment or deficiency. There are no liens or encumbrances relating to taxes
on or threatened against any of the assets of Contributor. Contributor has
withheld and paid all taxes required by law to have been withheld and paid by
it. Neither Contributor nor any predecessor of Contributor is or has been a
party to any tax allocation or sharing agreement or a member of an affiliated
group of corporations filing a consolidated Federal income tax return.
Contributor has delivered to Pentegra correct and complete copies of
Contributor's three most recently filed annual state, local and Federal income
tax returns, together with all examination reports and statements of
deficiencies assessed against or agreed to by Contributor during the three
calendar year period preceding the date of this Agreement. Contributor has
neither made any payments, is obligated to make any payments, or is a party to
any agreement that under any circumstance could obligate it to make any payments
that will not be deductible under Code section 280G.
(b) Contributor does not intend to dispose of any of the shares of Pentegra
Common Stock to be received hereunder and is not a party to any plan,
arrangement or agreement for the disposition of such shares.
<PAGE>
Contributor and Shareholders have no knowledge, after due inquiry, of any
such intent, plan, arrangement or agreement by any Shareholder. Nothing
contained herein shall prohibit Contributor from selling such shares of
Pentegra Common Stock after the designated holding period and in accordance
with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated by
this Agreement which may be now or hereafter asserted against Pentegra,
Contributor or Contributor's shareholders resulting from any action taken by
Contributor or any Shareholder or their respective agents or employees, or any
of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against
on the Balance Sheet, Contributor did not have, as of the Balance Sheet Date,
and has not incurred since that date and will not have incurred as of the
Closing Date, any liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, other than
those incurred in the ordinary course of business or as set forth on EXHIBIT
2.16. Contributor and Shareholders do not know, or have reasonable grounds to
know, of any basis for the assertion against Contributor or any Shareholder as
of the Balance Sheet Date, of any claim or liability of any nature in any amount
not fully reflected or reserved against on the Balance Sheet, or of any claim or
liability of any nature arising since that date other than those incurred in the
ordinary course of business or contemplated by this Agreement. All indebtedness
of Contributor (including without limitation, indebtedness for borrowed money,
guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached
hereto.
2.20 INSURANCE POLICIES. Contributor, each Shareholder and each licensed
professional of Contributor carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the industry.
Valid and enforceable policies in such amounts are outstanding and duly in force
and will remain duly in force through the Closing Date. All such policies are
described in EXHIBIT 2.20 attached hereto and true and correct copies have been
delivered to Pentegra. Neither Shareholders nor Contributor have not received
notice or other communication from the issuer of any such insurance policy
cancelling or amending such policy or threatening to do so. Neither
Contributor, nor any Shareholder nor any licensed professional employee of
Contributor has any outstanding claims, settlements or premiums owed against any
insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached
hereto, Contributor has neither established, nor maintains, nor is obligated to
make contributions to or under or otherwise participate in, (a) any bonus or
other type of compensation or employment plan, program, agreement, policy,
commitment, contract or arrangement (whether or not set forth in a written
document); (b) any pension, profit-sharing, retirement or other plan, program or
arrangement; or (c) any other employee benefit plan, fund or program, including,
but not limited to, those described in SECTION 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). All such plans listed on
EXHIBIT 2.20 (individually "Contributor Plan," and collectively "Contributor
Plans") have been operated and administered in all material respects in
accordance with all applicable laws, rules and regulations, including without
limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of
the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended,
the Age Discrimination in Employment Act of 1967, as amended, and the related
rules and regulations adopted by those Federal agencies responsible for the
administration of such laws. No act or failure to act by Contributor has
resulted in a "prohibited transaction" (as defined in ERISA) with respect to the
Contributor Plans. No "reportable event" (as defined in ERISA) has occurred
with respect to any of the Contributor Plans. Contributor has not previously
made, is not currently making, and is not obligated in any way to make, any
contributions to any multiemployer plan within the meaning of the Multi-Employer
Pension Plan Amendments Act of 1980. With respect to each Contributor Plan,
either (i) the value of plan assets (including commitments under insurance
contracts) is at least equal to the value of plan liabilities or (ii) the value
of plan liabilities in excess of plan assets is disclosed on the Balance Sheet,
all as of the Closing Date.
<PAGE>
2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Contributor, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Shareholders and
Contributor's licensed professional employees, and the conduct of the Business
and use of the Assets, have complied with all applicable laws, rules,
regulations and licensing requirements, including, without limitation, the
Federal Environmental Protection Act, the Occupational Safety and Health Act,
the Americans with Disabilities Act and any environmental laws and medical waste
laws, and there exist no violations by Contributor, any Shareholder or any
licensed professional employee of Contributor of any Federal, state or local law
or regulation. Contributor and Shareholders have not received any notice of a
violation of any Federal, state and local laws, regulations and ordinances
relating to the operations of the Business and Assets and no notice of any
pending inspection or violation of any such law, regulation or ordinance has
been received by Contributor.
2.24 THIRD PARTY PAYORS. Contributor, Shareholders and each licensed
professional employee or independent contractor of Contributor has timely filed
all claims or other reports required to be filed with respect to the purchase of
services by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are no
pending appeals, overpayment determinations, adjustments, challenges, audit,
litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Contributor, any
Shareholder and each licensed professional employee of Contributor. Neither
Contributor, nor any Shareholder, nor any licensed professional employee of
Contributor has been convicted of, or pled guilty or nolo contendere to, patient
abuse or negligence, or any other Medicare or Medicaid program related offense
and none has committed any offense which may serve as the basis for suspension
or exclusion from the Medicare and Medicaid programs or any other third party
payor program. With respect to payors, Contributor, Shareholders and
Contributor's licensed professional employees has not (a) knowingly and
willfully making or causing to be made a false statement or representation of a
material fact in any application for any benefit or payment; (b) knowingly and
willfully making or causing to be made any false statement or representation of
a material fact for use in determining rights to any benefit or payment; (c)
failed to disclose knowledge of the occurrence of any event affecting the
initial or continued right to any benefit or payment on its own behalf or on
behalf of another, with the intent to fraudulently secure such benefit or
payment; and (d) violated any applicable state anti-remuneration or
self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Contributor or Shareholders in this Agreement, and no Exhibit or certificate
issued or executed by, or information furnished by, officers or directors of
Contributor or any Shareholder and furnished or to be furnished to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Contributor has with any bank or other
financial institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Contributor, or their respective spouses,
children or affiliates, owns directly or indirectly, on an individual or joint
basis, any interest in, has a compensation or other financial arrangement with,
or serves as an officer or director of, any customer or supplier or competitor
of Contributor or any organization that has
<PAGE>
a material contract or arrangement with Contributor.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of
the names and addresses of each payor of Contributor's services which accounted
for more than 10% of revenues of Contributor in the preceding fiscal year.
Contributor has good relations with all such payors and other material payors of
Contributor and none of such payors has notified Contributor that it intends to
discontinue its relationship with Contributor or to deny any claims submitted to
such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Contributor and Shareholders
as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions required
by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize
the execution, delivery and performance of this Agreement and such related
documents. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing Date,
duly executed and delivered by Pentegra and constitute or will constitute the
legal, valid and binding obligations of Pentegra, enforceable against Pentegra
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and delivery
of this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and, the
consummation of the actions contemplated hereby will not, violate any provision
of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or decree
to which Pentegra is a party or by which Pentegra is bound, or violate any
material restrictions of any kind to which Pentegra is subject, or result in any
lien or encumbrance on any of Pentegra's assets. Other than as have been
obtained or as would not have a material adverse effect, there are no consents
of any person or entity required for the transaction contemplated hereby on
behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Pentegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would not
have a material adverse effect, there are no proceedings pending or, to the
knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses or
permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any pending,
nor does Pentegra have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Pentegra, its business, assets or the transactions contemplated by
this Agreement, and, to the knowledge of Pentegra, no basis for any such action
exists, nor is there any legal impediment of which Pentegra has knowledge to the
continued operation of its business or the use of its Assets in the ordinary
course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports and
other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to
<PAGE>
have been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra
in this Agreement, and no Exhibit or certificate issued by officers or directors
of Pentegra and furnished or to be furnished to Contributor or any Shareholder
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
SECTION 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS.
Contributor and Shareholders, jointly and severally, agree that between
the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Shareholders
shall use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Contributor
and Shareholders agree to complete the Exhibits hereto to be provided by them in
form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Contributor and Shareholders shall operate the
Business and use the Assets in the ordinary course. Contributor and
Shareholders shall not enter into any lease, contract, indebtedness, commitment,
purchase or sale or acquire or dispose of any capital asset relating to the
Business or the Assets except in the ordinary course of business. Contributor
and Shareholders shall use their best efforts to preserve the Business and
Assets intact and shall not take any action that would have an adverse effect on
the Business or Assets. Contributor and Shareholders shall use their best
efforts to preserve intact the relationships with payors, customers, suppliers,
patients and others having significant business relations with Contributor.
Contributor and Shareholders shall collect its receivables and pay its trade
payables in the ordinary course of business. Contributor and Shareholders shall
not introduce any new method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Contributor and Shareholders shall permit Pentegra
and its authorized representatives access to, and make available for inspection,
all of the assets and business of Contributor, the Business and the Assets,
including employees, customers and suppliers and permit Pentegra and its
authorized representatives to inspect and make copies of all documents, records
and information with respect to the business or assets of Contributor, the
Business or the Assets as Pentegra or its representatives may request.
Contributor and Shareholders shall promptly notify Pentegra in writing of (a)
any notice or communication relating to a default or event that, with notice or
lapse of time or both, could become a default, under any
<PAGE>
contract, commitment or obligation to which Contributor is a party or
relating to the Business or the Assets, and (b) any adverse change in
Contributor's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor and
Shareholders shall use their best efforts to secure all necessary approvals and
consents of third parties to the consummation of the transactions contemplated
hereby, including consents described on EXHIBIT 2.4. Contributor and
Shareholders shall use their best efforts to obtain all licenses, permits,
approvals or other authorizations required under any law, rule, regulation, or
otherwise to provide the services of Contributor contemplated by the Service
Agreement and to conduct the intended business of Contributor and operate the
Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of Closing or the termination of this Agreement in accordance with the
provisions hereof, Contributor and Shareholders shall not, and shall use its
best efforts to cause Contributor's employees, agents and representatives not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer, including without limitation,
any proposal or offer to any Shareholder, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of Contributor or
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to such proposal
or offer, and Contributor and Shareholders will immediately cease any such
activities, discussions or negotiations heretofore conducted with respect to any
of the foregoing. Contributor and Shareholders shall immediately notify
Pentegra if any such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby covenants
and agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Contributor or any entity might have any liability whatsoever
arising from any insurance, pension plan, employment tax or similar liability
of Contributor to any employee or other person or entity (including, without
limitation, any Contributor Plan and any liability under employment contracts
with Contributor) allocable to services performed prior to the Closing Date.
Contributor and Shareholders acknowledge that the purpose and intent of this
covenant is to assure that Pentegra shall have no unfunded liability whatsoever
at any time after the Closing Date with respect to any of Contributor's
employees or similar persons or entities, including, without limitation, any
Contributor Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of any Shareholder (other than in the ordinary course of business) or other
employee or an independent contractor of Contributor, adopt, amend or terminate
any compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect upon Contributor, its business, assets or
prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Contributor, nor will any repurchase of
any of Contributor's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Shareholders
shall use their best efforts to take, or cause to be taken, all actions
necessary to effect the acquisition contemplated hereby under applicable law.
<PAGE>
4.10 ACCOUNTING AND TAX MATTERS. Contributor and Shareholders will not
change in any material respect the tax or financial accounting methods or
practices followed by Contributor (including any material change in any
assumption underlying, or any method of calculating, any bad debt, contingency
or other reserve), except as may be required by law or generally accepted
accounting principles. Contributor and Shareholders will duly, accurately and
timely (without regard to any extensions of time) file all returns, information
statements and other documents relating to taxes of Contributor required to be
filed by it, and pay all taxes required to be paid by it, on or before the
Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Contributor hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Contributor and Shareholders covenant and agree that all of the
creditors with respect to the Business and the Assets will be paid in full by
Contributor prior to the Closing Date, except to extent that any liability to
such creditors is assumed by Pentegra pursuant to this Agreement. If required
by Pentegra, Contributor and Shareholders shall furnish Pentegra with proof of
payment of all creditors with respect to the Business and the Assets.
Notwithstanding the foregoing, Contributor and Shareholders may dispute the
validity or amount of any such creditor's claim without being deemed to be in
violation of this SECTION 4.11, provided that such dispute is in good faith and
does not unreasonably delay the resolution of the claim and provided, further
that Contributor and Shareholders agree to indemnify and bond Pentegra for such
amounts as is satisfactory to Pentegra.
4.12 LEASE. If Contributor leases any of its premises from any Shareholder
or other affiliate of Contributor or any shareholder of Contributor, Pentegra
shall have entered into a building lease (the "Building Lease") with the owner
of such premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, (i) a five year initial
term plus three five-year renewal options, (ii) a lease rate equal to the fair
market value lease rate, as agreed to by Pentegra, and (iii) such other
provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Contributor and Shareholders shall cooperate
with all requests made by Pentegra for the purpose of allowing Pentegra to hire
those non-dental employees of Contributor designated by Pentegra, such
employment to be effective as of the Closing Date. Notwithstanding the above,
Contributor and Shareholders shall remain liable under any Contributor Plans for
any claims incurred by any employees or their spouses or dependents, and for all
compensation, bonuses, benefits and other such items and other liabilities
related to Contributor's employees incurred by Contributor prior to the Closing
Date.
4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges that all
employees of Contributor hired by Pentegra pursuant to SECTION 4.13 above,
shall be treated as "leased employees" (as defined in Code Section 414(n)) of
Contributor and shall be treated as Clinic employees for purposes of eligibility
and participation in Contributor Plans.
4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective as
of the Closing Date.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts
<PAGE>
to secure all necessary approvals and consents of third parties to the
consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS.
Pentegra, Shareholders and Contributor agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Contributor and Shareholders shall
cooperate to promptly prepare and file with the Securities Exchange Commission
("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to
be filed by Pentegra in connection with its Initial Public Offering (including
the prospectus constituting a part thereof, the "Registration Statement").
Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits
and approvals required to carry out the transactions contemplated by this
Agreement and the Contributor and Shareholders shall furnish all information
concerning Contributor and Shareholders as may be reasonable requested in
connection with any such action.
Contributor and Shareholder represent and warrant that none of the
information or documents supplied or to be supplied by it specifically for
inclusion in the Registration Statement, by exhibit or otherwise, will, at the
time the Registration Statement and each amendment or supplement thereto, if
any, becomes effective under the Securities Act of 1933, 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, in light of the
circumstances under which they were made, not misleading. Contributor and
Shareholders shall be entitled to review the Registration Statement and each
amendment thereto, if any, prior to the time each becomes effective under the
Securities Act of 1933.
Contributor and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by Pentegra
in connection with the preparation of the Registration Statement and each
amendment or supplement thereto, or any other statement, filing, notice or
application made by or on behalf of each such party or any of its subsidiaries
to any governmental entity in connection with the transactions contemplated by
the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at or
prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Contributor and Shareholders contained herein shall have been true and correct
in all respects when initially made and shall be true and correct in all
respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Contributor and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Contributor and Shareholders
prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Contributor shall have occurred since the
<PAGE>
Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Contributor, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and Pentegra shall
have executed and delivered a Service Agreement (the "Service Agreement"), in
substantially the form attached hereto as EXHIBIT 7.7, pursuant to which
Pentegra will provide management services to the Contributor. Each Shareholder
shall have executed and delivered a Guaranty Agreement in substantially the form
attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder
shall, among other things, guaranty the obligations of Contributor under the
Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated, and
caused each shareholder of Contributor that has an existing employment agreement
with Contributor to have terminated his or her employment agreement with
Contributor and shall have executed an employment agreement ("Employment
Agreement") with Contributor in form and substance attached hereto as EXHIBIT
7.8 and otherwise satisfactory to Contributor and Pentegra.
7.9 CONSENTS AND APPROVALS. Contributor and Shareholders shall have
obtained all necessary government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly
executed in form satisfactory to Pentegra and its counsel, referred to in
SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or
payables between Contributor and its shareholders or affiliates and Contributor
shall not have any liabilities, including indebtedness, guaranties and capital
leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Contributor and Shareholders shall have named Pentegra as
an additional insured on their liability insurance program in accordance with
SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Contributor since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Contributor and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
<PAGE>
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Pentegra contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Contributor shall have received all documents,
duly executed in form satisfactory to Contributor and its counsel, referred to
in SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. Within five business
days after requested by Pentegra, Contributor and Shareholders shall deliver
to Pentegra the following, all of which shall be in a form satisfactory to
counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel
for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or
letter agreement in form and substance mutually acceptable to the parties
hereto:
(a) an executed original Service Agreement and executed originals of all
documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of Contributor
authorizing the execution, delivery and performance of this Agreement, the
Service Agreement, the Employment Agreements and all related documents and
agreements each certified by the Secretary as being true and correct copies
of the original thereof;
(d) a bill of sale conveying the Assets to Pentegra;
(e) an assignment of each contract, agreement and lease being assigned
to and assumed by Pentegra;
(f) certificates of the Shareholders and a duly authorized officer of
Contributor dated as of the
<PAGE>
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Contributor and Shareholder contained herein; (ii) as to the
performance of and compliance by Contributor and Shareholder with all
covenants contained herein; and (iii) certifying that all conditions
precedent of Contributor and Shareholders to the Closing have been satisfied;
(g) a certificate of the Secretary of Contributor certifying as to the
incumbency of the directors and officers of Contributor and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Contributor;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Contributor and any state of required
foreign qualification of Contributor establishing that Contributor is in
existence and is in good standing to transact business in its state of
incorporation;
(i) an opinion of counsel to Contributor and Shareholder opining as to the
execution and delivery of this Agreement and the other documents and agreements
to be executed pursuant hereto, the good standing and authority of Contributor,
the enforceability of this Agreement and the other agreements and documents to
be executed in connection herewith, and other matters reasonably requested by
Pentegra;
(j) non-foreign affidavits executed by Contributor;
(k) all authorizations, consents, approvals, permits and licenses referred
to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Contributor, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall
deliver to Contributor and Shareholder, the following, all of which shall be in
a form satisfactory to counsel to Contributor and Shareholders and shall be held
by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing,
pursuant to an escrow agreement or letter agreement in form and substance
mutually acceptable to the parties hereto:
(a) the Acquisition Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being assigned to
and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra (or a
committee thereof) authorizing the execution, delivery and performance of this
Agreement and all related documents and agreements each certified by the
Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the Closing
Date, (i) as to the truth and correctness of the representations and warranties
of Pentegra contained herein; (ii) as to the performance of and compliance by
Pentegra with all covenants contained herein; and (iii) certifying that all
conditions precedent of Pentegra to the Closing have been satisfied;
<PAGE>
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and the
State of incorporation of Contributor;
(h) an opinion of counsel to Pentegra opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Pentegra, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Contributor;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Contributor to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in
any Exhibit attached hereto, any agreement executed pursuant hereto, and any
certificate executed and delivered by any party pursuant to the terms of this
Agreement, shall constitute representations and warranties of Contributor and
Shareholders, jointly and severally, or of Pentegra, as the case may be. All
such representations and warranties, and all representations and warranties
expressly labeled as such in this Agreement shall survive the date of this
Agreement and the Closing Date for a period of five (5) years following the
Closing Date, except that (i) the representations and warranties with respect to
environmental and medical waste laws and health care laws and matters shall
survive for a period of fifteen (15) years and tax representations shall survive
until one year after the expiration of the applicable statute of limitations.
Each party covenants with the other parties not to make any claim with respect
to such representations and warranties, against any party after the date on
which such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless
such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4
hereof, as the case may be. Each party hereby releases, acquits and discharges
the other party from any and all claims and demands, actions and causes of
action, damages, costs, expenses and rights of setoff with respect to which the
notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely
provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD CONTRIBUTOR AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING CONTRIBUTOR AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"),
HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS,
SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO,
REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY
REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO
<PAGE>
BE FURNISHED BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY
PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF,
OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. CONTRIBUTOR AND
SHAREHOLDERS (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD
PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND
EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS
SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED
PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS,
DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT
LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING
FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER, AND
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS WHETHER ON OR
AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY CONTRIBUTOR OR ITS SHAREHOLDERS OR THEIR CONSULTANTS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS
GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING
OUT OF OR RESULTING FROM ACTIONS OF THE CONTRIBUTOR OR SHAREHOLDERS RELATING TO
CLAIMS SUBMITTED TO ANY THIRD
<PAGE>
PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF CONTRIBUTOR OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY
RELATED TO OR AFFILIATED WITH THE CONTRIBUTOR OR SHAREHOLDER ARISING FROM OR AS
A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF CONTRIBUTOR OR THE SHAREHOLDERS FOR COSTS AND
EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION
WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS AND
PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE CONTRIBUTOR OR ITS SHAREHOLDERS
SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION
STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR
SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED
OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS
SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the defense
of such action or proceeding, such Indemnified Person shall notify Indemnitor
thereof. If any such action or other proceeding shall be brought against any
Indemnified Person, Indemnitor shall, upon written notice given within a
reasonable time following receipt by Indemnitor of such notice from Indemnified
Person, be entitled to assume the defense of such action or proceeding with
counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person;
provided, however, that any Indemnified Person may at its own expense retain
separate counsel to participate in such defense. Notwithstanding the foregoing,
Indemnified Person shall have the right to employ separate counsel at
Indemnitor's expense and to control its own defense of such action or proceeding
if, in the reasonable opinion of counsel to such Indemnified Person, (a) there
are or may be legal defenses available to such Indemnified Person or to other
Indemnified Persons that are different from or additional to those available to
Indemnitor and which could not be adequately advanced by counsel chosen by
Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor
and such Indemnified Person that would make such separate representation
advisable; provided, however, that in no event shall Indemnitor be required to
pay fees and expenses hereunder for more than one firm of attorneys of
Indemnified Person in any jurisdiction in any one action or proceeding or group
of related actions or proceedings. Indemnitor shall
<PAGE>
not, without the prior written consent of any Indemnified Person, settle or
compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding to which such Indemnified Person is a
party unless such settlement, compromise or consent includes an unconditional
release of such Indemnified Person from all liability arising or potentially
arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Contributor or any Shareholder giving
rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra
shall be entitled to offset the amount of damages incurred by it as a result of
such breach of warranty, representation, covenant or agreement against any
amounts payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of
Contributor or Shareholder contained in this Agreement or in any certificate or
other document executed and delivered by Contributor or any Shareholder pursuant
to this Agreement is or becomes untrue or breached in any material respect or if
Contributor or any Shareholder fails to comply in any material respect with any
covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
(c) at any time by Contributor or any Shareholder if any representation or
warranty of Pentegra contained in this Agreement or in any certificate or other
document executed and delivered by Pentegra pursuant to this Agreement is or
becomes untrue or breached in any material respect or if Pentegra fails to
comply in any material respect with any covenant or agreement contained herein
and such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra, Shareholders or Contributor if the transaction
contemplated hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Contributor, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date,
Contributor shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of
Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer shall
be treated as effective for any purpose or (b) engage in any transaction,
whether or not with respect to any shares of Pentegra Common Stock or any
interest therein, the intent or effect of which is to reduce the risk of owning
shares of Pentegra Common Stock. The certificates evidencing the Pentegra
Common Stock delivered to Contributor pursuant to the terms hereof will bear a
legend substantially in the form set forth below and containing such other
information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged,
<PAGE>
transferred, encumbered, pledged, distributed, appointed or otherwise
disposed of, and the issuer shall not be required to give effect to any
attempted voluntary sale, assignment, exchange, transfer, encumbrance,
pledge, distribution, appointment or other disposition prior to
_________ [date that is one year from the Closing Date]. Upon the
written request of the holder of this certificate, the issuer agrees
to remove this restrictive legend (and any stop order placed with the
transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Shareholders
acknowledge that the shares of Pentegra Common Stock to be delivered to
Contributor pursuant to this Agreement have not been and will not be registered
under the Securities Act of 1933 and may not be resold without compliance with
the Securities Act of 1933. The Pentegra Common Stock to be acquired by
Contributor pursuant to this Agreement is being acquired solely for its own
account, for investment purposes only and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution. Contributor covenants, warrants and represents that none of the
shares of Pentegra Common Stock issued to it will be offered, sold, assigned,
pledged, hypothecated, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the Securities Act, as
amended, and the rules and regulations of the Securities Exchange Commission and
applicable state securities laws and regulations. All certificates evidencing
shares of Pentegra Common Stock shall bear the following legend in addition to
the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the
Securities Act of 1933 (the "Act") and may only be sold or otherwise
transferred if the holder hereof complies with the Act and applicable
securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Contributor resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Shareholders are able
to bear the economic risk of an investment in Pentegra Common Stock acquired
pursuant to this Agreement and can afford to sustain a total loss of such
investment and have such knowledge and experience in financial and business
matters that they are capable of evaluating the merits and risks of the proposed
investment and therefore have the capacity to protect their own interests in
connection with the acquisition of the Pentegra Common Stock. Contributor,
Shareholders and their representatives have had an adequate opportunity to ask
questions and receive answers from the officers of Pentegra concerning any and
all matters relating to the background and experience of the officers and
directors of Pentegra, the plans for the operations of the business of Pentegra,
and any plans for additional acquisitions and the like. Contributor,
Shareholders and their representatives have asked any and all questions in the
nature described in the preceding sentence and all questions have been answered
to their satisfaction. Contributor and Shareholders are "accredited investors"
as defined in Regulation D of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Contributor and Shareholders agree that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally through
no fault of Contributor or Shareholders, (ii) disclosure is required by law or
the order of any governmental authority under color of law, provided, that prior
to disclosing any information pursuant to this clause (ii), Contributor and
Shareholders shall, if possible, give prior written notice thereof to the other
parties hereto, and provide such other parties hereto with the opportunity to
contest such disclosure, (iii) Contributor and Shareholders reasonably believe
that such disclosure is required in connection with the defense of a lawsuit
against the disclosing party, or (iv)
<PAGE>
Contributor and Shareholders are the sole and exclusive owner of such
confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Contributor or Shareholders of the provisions of this SECTION 13, Pentegra
shall be entitled to an injunction restraining Contributor and Shareholders
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Pentegra from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. The obligations of the parties under this SECTION 13 shall
survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement, together with the transactions contemplated by the Other
Agreement and the Initial Public Offering, will qualify as an exchange meeting
the requirements of Section 351 of the Code. The tax returns (and schedules
thereto) of Shareholders, Contributor and Pentegra shall be filed in a manner
consistent with such intention and Contributor and Pentegra shall each provide
the other with such tax information, reports, returns or schedules as may be
reasonably required to assist the other in so reporting the transactions
contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery, or by
facsimile AND overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Contributor or Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the
<PAGE>
overnight courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this Agreement,
whether or not such transactions are consummated. Without limiting the
generality of the foregoing and whether or not such liabilities may be deemed to
have been incurred in the ordinary course of business, Pentegra shall not be
liable to or required to pay, either directly or indirectly, any fees and
expenses of legal counsel, accountants, auditors or other persons or entities
retained by Contributor or any Shareholder for services rendered in connection
with negotiating and closing the transactions contemplated by this Agreement or
the documents to be executed in connection herewith, whether or not such costs
or expenses are incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure, either
written or oral, regarding the transactions contemplated by this Agreement
without the prior written consent of the other party, provided that the
foregoing shall not prohibit any disclosure (a) by press release, filing or
otherwise that Pentegra has determined in good faith judgment to be required by
Federal securities laws or the rules of the National Association of Securities
Dealers, (b) to attorneys, accountants, investment bankers or other agents of
the parties assisting the parties in connection with the transactions
contemplated by this Agreement, and (c) by Pentegra in connection with the
conduct of its Initial Public Offering and conducting an examination of the
operations and assets of Contributor.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF
CONTRIBUTOR AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS
PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are
integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and not
only in connection with the specific representation in which they are explicitly
referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS
ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY
AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR
ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which when so executed shall be deemed to be an original, and such
counterparts shall together constitute and be one and the same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and
shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder
<PAGE>
without the prior written consent of the other parties; provided, however,
that Pentegra may assign its rights and delegate its obligations hereunder to
any entity that is an affiliate of Pentegra. For purposes of this Agreement
an "affiliate" of Pentegra shall include any entity that, through one or more
intermediaries is, controlled, controlled by or under common control with,
Pentegra. Upon any such assignment prior to the Closing, all references
herein to Pentegra (including those to Pentegra Common Stock) shall be deemed
to include references to the assignee and the assignee's common stock.
Notwithstanding any such assignment, Pentegra shall not, absent a written
release from Contributor, be relieved from its obligations to Contributor
under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or
Contributor, on the other hand, file suit in any court against any other party
to enforce the terms of this Agreement against the other party or to obtain
performance by it hereunder, the prevailing party will be entitled to recover
all reasonable costs, including reasonable attorneys' fees, from the other party
as part of any judgment in such suit. The term "prevailing party" shall mean the
party in whose favor final judgment after appeal (if any) is rendered with
respect to the claims asserted in the Complaint. "Reasonable attorneys' fees"
are those reasonable attorneys' fees actually incurred in obtaining a judgment
in favor of the prevailing party.
14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at Closing a pro
rata portion of all taxes levied upon the Assets for the calendar year in which
the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated
among Contributor and Pentegra as of the Closing Date, and the prorated amount
due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes and
shall pay Contributor or may demand from Contributor, and Contributor agrees to
pay, the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing, and
signed by the parties hereto. The waiver of any of the terms and conditions of
this Agreement shall not be construed as a waiver of any other terms and
conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the Contributors
or Shareholders (hereinafter referred to as a "Party"), whether made before or
after the institution of any legal proceeding, any dispute among the parties
hereto in any way arising out of, related to, or in connection with this
Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in
accordance with the terms of this Section (hereinafter the "Arbitration
Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in accordance
with the terms of this Arbitration Program, the Commercial Arbitration Rules of
the AAA. In the event of any inconsistency between this Arbitration Program and
those rules or statutes, then the terms of this Arbitration Program shall
control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or foreclosing upon any
personal property in which there has been granted a security interest or lien
by a Party in the Documents. In Disputes involving indebtedness or other
monetary obligations, each Party agrees that the other Party may proceed
against all liable persons, jointly and severally against one or more of
them, without impairing rights against other liable persons. Nor shall a
Party be required to join the principal obligor or any other liable persons
(e.g., sureties or guarantors) in any proceeding against a particular person.
A Party may release or settle with one or more liable persons as the Party
deems fit without releasing or impairing rights to proceed against any
persons not so released.
<PAGE>
All statutes of limitation that would otherwise be applicable shall apply to
any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing, of
that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoenix,
Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or by
applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be found to be
illegal, invalid or unenforceable under present or future laws, such provision
shall be fully severable and this Agreement shall be construed and enforced as
if such provision never comprised a part hereof; and the remaining provisions
hereof shall remain in full force and effect. In lieu of such provision, there
shall be added automatically as part of this Agreement, a provision as similar
in its terms to such provision as may be possible and be legal, valid and
enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
Randy O'Brien, D.D.S., Inc.
By: /s/ Randy O'Brien, D.D.S.
-------------------------------------------
Its:
------------------------------------------
PENTEGRA DENTAL GROUP, INC.
By: /s/ James L. Dunn, Jr.
-------------------------------------------
Its: Senior Vice President
------------------------------------------
/s/ Randy O'Brien, D.D.S.
----------------------------------------------
Randy O'Brien, D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment
Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
AND
TERRENCE C. O'KEEFE, D.D.S.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . 3
2.4 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . 3
2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . 3
2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . 3
2.8 LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . 3
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . 3
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . 6
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.20 INSURANCE POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.21 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . 6
2.22 ADVERSE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . 7
2.24 THIRD PARTY PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 7
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS . . . . . . . 8
2.28 PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING . . . . . . . . . . . . . . . . . 8
3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 8
Section 4. COVENANTS OF DENTIST.
4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 9
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . 9
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . 9
4.7 EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . 10
4.9 REQUIREMENTS TO EFFECT ACQUISITION . . . . . . . . . . . . . . . . . 10
4.10 ACCOUNTING AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . . 10
4.11 WAIVER OF BULK TRANSFER COMPLIANCE . . . . . . . . . . . . . . . . . 10
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . 10
4.14 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . 10
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . . . 10
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.18 POWER AND AUTHORITY FOR TRANSACTIONS . . . . . . . . . . . . . . . . 11
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.20 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . 11
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 11
Section 6. COVENANTS OF PENTEGRA AND DENTIST
6.1 FILINGS; OTHER ACTIONS . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . 12
7.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . 12
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.4 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . 12
7.5 DUE DILIGENCE REVIEW . . . . . . . . . . . . . . . . . . . . . . . . 12
7.6 APPROVAL BY THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . 12
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL . . . . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8. DENTIST'S CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . 13
8.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . 13
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.4 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9. CLOSING DELIVERIES
<PAGE>
9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 15
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . 15
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY DENTIST . . . . . . . . . . . . . . . . . . . . . 16
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . 17
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . 18
12.2 INVESTMENTS; COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . 19
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . 20
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . 21
14.12 NO RULE OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . 21
14.13 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . 21
14.14 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.15 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . 21
14.16 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed
as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra") and Terrence C. O'Keefe, D.D.S. ("Dentist").
WITNESSETH:
WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires
to receive from Dentist, certain assets of Dentist;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Dentist, the "Target Companies");
WHEREAS, it is intended for Federal income tax purposes that the
transfers contemplated by this Agreement, the Other Agreements and Pentegra's
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an
exchange within the meaning of Section 351 of the Internal Revenue Code of
1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated
hereby shall take place at 10:00 am local time, at the offices of Jackson &
Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra
Common Stock is consummated. The date on which the Closing occurs is
hereinafter referred to as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and
conditions contained herein, on the Closing Date, Dentist shall convey,
transfer, deliver and assign to Pentegra or any affiliate of Pentegra
designated by Pentegra all of Dentist's right, title and interest in and to
those certain assets described on EXHIBIT 1.1 attached hereto (individually,
"Asset", and collectively "Assets"), free and clear of all obligations,
security interests, claims, liens and encumbrances, except as specifically
assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof.
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to
be transferred and
<PAGE>
contributed hereunder, and Dentist shall retain all of its right, title and
interest in and to, the assets not specifically transferred hereunder,
including without limitation, the assets described on EXHIBIT 1.2 (the
"Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration
for the Assets and the representations, warranties and agreements of Dentist
contained herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Dentist the consideration specified
in ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b)
attached hereto to the extent that such obligations, commitments, liabilities
and indebtedness are current and not otherwise in default. (the "Assumed
Liabilities"). Notwithstanding any contrary provision contained herein,
Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i)
any liability, commitment or obligation or trade payable or indebtedness not
specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on
EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default
under such contracts, leases, commitments or obligations which occurred on or
before the Closing Date; (iii) any liability for any employee benefits
payable to employees of Dentist, including, but not limited to, liabilities
arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any
liability based upon or arising out of a violation of any antitrust or
similar restraint-of-trade laws by Dentist, including, without limiting the
generality of the foregoing, any such antitrust liability which may arise in
connection with agreements, contracts, commitments or orders for the sale of
goods or provision of services by Dentist reflected on the books of Dentist
at or prior to the Closing Date; (v) any liability based upon or arising out
of any tortious or wrongful actions of Dentist, any licensed professional
employee or independent contractor of Dentist, (vi) any liability for the
payment of any taxes of Dentist, including without limitation, sales, use and
other transfer taxes and income taxes arising from or by reason of the
transactions contemplated by this Agreement; (vii) any indebtedness secured
by deeds of trust or mortgages on real property; nor (viii) any liability
incurred or to be incurred pursuant to any malpractice or other suits or
actions pending against Dentist.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date,
Pentegra shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in Pentegra its
right, title or interest in, to or under any of the Assets or otherwise to
carry out this Agreement, in return for the consideration set forth in this
Agreement, the Dentist shall execute and deliver all such deeds, bills of
sale, assignments and assurances and take and do all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under the Assets in Pentegra or
otherwise to carry out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
Dentist hereby represents and warrants to Pentegra as follows:
2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of
the State of Texas. Dentist does not have any assets, employees or offices
in any state other than the state set forth in the first sentence of this
SECTION 2.1.
2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter
into and perform this
<PAGE>
Agreement and the other agreements to be executed and delivered in connection
herewith. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing
Date, duly executed and delivered by Dentist and constitute or will
constitute the legal, valid and binding obligations of Dentist in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of
this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and,
subject to the receipt of consents described on EXHIBIT 2.4, the consummation
of the actions contemplated hereby will not, result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Dentist is a party or
by which Dentist is bound, or violate any material restrictions of any kind
to which Dentist is subject, or result in any lien or encumbrance on any of
Dentist's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All
material building or other permits, certificates of occupancy, concessions,
grants, franchises, licenses, certificates of need and other governmental
authorizations and approvals required for the conduct of the Business or the
use of the Assets, or waivers thereof, have been duly obtained and are in
full force and effect and are described on EXHIBIT 2.3. There are no
proceedings pending or, to the knowledge of Dentist, threatened, which may
result in the revocation, cancellation or suspension, or any adverse
modification, of any such licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Dentist.
2.5 [INTENTIONALLY DELETED].
2.6 [INTENTIONALLY DELETED].
2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore
furnished Pentegra with copies of its unaudited balance sheet and related
unaudited statements of income, retained earnings and cash flows for its
prior two full fiscal years, as well as copies of its unaudited balance sheet
as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet"
and the latest date thereof shall be referred to as the "Balance Sheet Date")
and any related unaudited statements of income, retained earnings, schedule
of accounts receivable, accounts payable and accrued liabilities, and cash
flows for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Dentist as of
the dates and for the periods indicated and reflect all fixed and contingent
liabilities of Dentist.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all
leases pursuant to which Dentist leases, as lessor or lessee, real or
personal property used in operating the Business, related to the Assets or
otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable
in accordance with their respective terms, and there is not under any such
lease any existing default by Dentist, as lessor or lessee, or any condition
or event of which Dentist has knowledge which with notice or lapse of time,
or both, would constitute a default, in respect of which Dentist has not
taken adequate steps to cure such default or to prevent a default from
occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition
and repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Dentist has no knowledge of any
latent defects therein.
<PAGE>
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good,
valid and marketable title to all of the Assets, free and clear of any liens,
claims, charges, exceptions or encumbrances, except for those, if any, which
are set forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all
encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances
indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the
Closing Date and evidence of such releases of liens and claims shall be
provided to Pentegra on the Closing Date and the Assets shall not be used to
satisfy such liens, claims or encumbrances. Pentegra acknowledges that it
has acquired the assets "where and as is" relying solely upon Pentegra's own
examination.
2.11 INVENTORIES. All of the Assets constituting inventory are
owned or used by Dentist, are in good, current, standard and merchantable
condition and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on
EXHIBIT 2.12, Dentist has no right, title or interest in or to patents,
patent rights, corporate names, assumed names, manufacturing processes, trade
names, trademarks, service marks, inventions, specialized treatment
protocols, copyrights, formulas and trade secrets or similar items. Set
forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies
of Dentist, including the names of any entities from whom Dentist previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Dentist in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Dentist has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set
forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the
date of this Agreement of: (a) the most recent payroll report of Dentist,
showing all current employees of Dentist and their current levels of
compensation, (b) promised increases in compensation of employees of Dentist
that have not yet been effected, (c) oral or written employment agreements,
consulting agreements or independent contractor agreements (and all
amendments thereto) to which Dentist is a party, copies of which have been
delivered to Pentegra, and (d) all employee manuals, materials, policies,
procedures and work-related rules, copies of which have been delivered to
Pentegra. Dentist is in compliance with all applicable laws, rules,
regulations and ordinances respecting employment and employment practices.
Dentist has not engaged in any unfair labor practice. There are no unfair
labor practices charges or complaints pending or threatened against Dentist,
and Dentist has never been a party to any agreement with any union, labor
organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Except as set forth on Exhibit 2.16,
neither Dentist nor the Business nor any of the Assets is subject to any
pending, nor does Dentist have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Dentist, the Business, the Assets or the
transactions contemplated by this Agreement, and, to the knowledge of
Dentist, no basis for any such action exists, nor is there any legal
impediment of which Dentist has knowledge to the continued operation of its
business or the use of the Assets in the ordinary course, subject to consents
set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of
all written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Dentist ("Contracts"), entered into
<PAGE>
in connection with and related to the Assets or the Business, all of which
are listed or incorporated by reference on EXHIBIT 2.8 (in the case of
leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15
(in the case of Contracts other than leases) attached hereto. Except as
otherwise indicated on such Exhibits, all of such Contracts are valid,
binding and enforceable in accordance with their terms and are in full force
and effect, and no defenses, offsets or counterclaims have been asserted or
may be made by any party thereto. Except as indicated on such Exhibits,
there is not under any such Contract any existing default by Dentist, or any
condition or event of which Dentist has knowledge which with notice or lapse
of time, or both, would constitute a default. Dentist has no knowledge of
any default by any other party to such Contracts. Dentist has not received
notice of the intention of any party to any Contract to cancel or terminate
any Contract and have no reason to believe that any amendment or change to
any Contract is contemplated by any party thereto. Other than those
contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13
and EXHIBIT 2.15, Dentist is not a party to any material written or oral
agreement contract, lease or arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or
arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as
lessor or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
the Dentist, oral or written, that provide for prepayments or deferred
installment payments; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Dentist on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16,
Dentist has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement, other than in the course of business;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material
<PAGE>
obligation or liability (absolute, accrued, contingent or otherwise) other
than (i) liabilities shown or reflected on the Balance Sheet, (ii)
liabilities incurred since the Balance Sheet Date in the ordinary course of
business;
(c) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
(d) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(e) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Dentist since the Balance Sheet
Date;
(f) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(g) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(h) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(i) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(j) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(k) Experienced damage, destruction or loss (whether or not
covered by insurance) materially and adversely affecting any of its
properties, assets or business or the Business or the Assets, or experienced
any other material adverse change in its financial condition, assets,
prospects, liabilities or business; or
(l) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Dentist has filed all tax returns (including tax
reports and other statements) required to have been filed by it or have been
properly extended, and has paid all taxes (including any interest, penalty or
additions thereto) required to have been paid by it. All such tax returns
are complete and accurate in all respects and properly reflect the relevant
taxes for the periods covered thereby. Dentist has not received any notice
that any tax deficiency or delinquency has been or may be asserted against
Dentist. There are no audits relating to taxes of Dentist pending or in
process or, to the knowledge of Dentist, threatened. Dentist is not
currently the beneficiary of any waiver of any statute of limitations in
respect of taxes nor of any extension of time within which to file any tax
return or to pay any tax assessment or deficiency. There are no liens or
encumbrances relating to taxes on or threatened against any of the assets of
Dentist. Dentist has withheld and paid all taxes required by law to have
been withheld and paid by it. Neither Dentist nor any predecessor of Dentist
is or has been a party to any tax allocation or
<PAGE>
sharing agreement or a member of an affiliated group of corporations filing a
consolidated Federal income tax return. Dentist has delivered to Pentegra
correct and complete copies of Dentist's three most recently filed annual
state, local and Federal income tax returns, together with all examination
reports and statements of deficiencies assessed against or agreed to by
Dentist during the three calendar year period preceding the date of this
Agreement. Dentist has neither made any payments, is obligated to make any
payments, or is a party to any agreement that under any circumstance could
obligate it to make any payments that will not be deductible under Code
section 280G.
(b) Dentist does not intend to dispose of any of the shares of Pentegra
Common Stock to be received hereunder and is not a party to any plan,
arrangement or agreement for the disposition of such shares. Nothing
contained herein shall prohibit Dentist from selling such shares of Pentegra
Common Stock after the designated holding period and in accordance with
SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage
commissions or finder's or similar fees in connection with the transactions
contemplated by this Agreement which may be now or hereafter asserted against
Pentegra, Dentist resulting from any action taken by Dentist or their
respective agents or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Dentist did not have, as of the Balance Sheet
Date, and has not incurred since that date and will not have incurred as of
the Closing Date, any material liabilities or obligations of any nature,
whether accrued, absolute, contingent or otherwise, and whether due or to
become due, other than those incurred in the ordinary course of business or
as set forth on EXHIBIT 2.16. Dentist does not know, or have reasonable
grounds to know, of any basis for the assertion against Dentist as of the
Balance Sheet Date, of any claim or liability of any nature in any amount not
fully reflected or reserved against on the Balance Sheet, or of any claim or
liability of any nature arising since that date other than those incurred in
the ordinary course of business or contemplated by this Agreement. All
indebtedness of Dentist (including without limitation, indebtedness for
borrowed money, guaranties and capital lease obligations) is described on
EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Dentist and each licensed professional of
Dentist carries property, liability, malpractice, workers' compensation and
such other types of insurance as is customary in the industry. Valid and
enforceable policies in such amounts are outstanding and duly in force and
will remain duly in force through the Closing Date. All such policies are
described in EXHIBIT 2.20 attached hereto and true and correct copies have
been delivered to Pentegra. Dentist has not received notice or other
communication from the issuer of any such insurance policy cancelling or
amending such policy or threatening to do so. Neither Dentist nor any
licensed professional employee of Dentist has any outstanding claims,
settlements or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Dentist has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist
Plan," and collectively "Dentist Plans") have been operated and administered
in all material respects in accordance with all applicable laws, rules and
regulations, including without limitation, ERISA, the Internal Revenue Code
of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment
Act of 1967, as amended, and the related rules and regulations adopted by
those Federal agencies responsible for the administration of such laws. To
the best of the Dentist's knowledge, no act or failure to
<PAGE>
act by Dentist has resulted in a "prohibited transaction" (as defined in
ERISA) with respect to the Dentist Plans. No "reportable event" (as defined
in ERISA) has occurred with respect to any of the Dentist Plans. Dentist has
not previously made, is not currently making, and is not obligated in any way
to make, any contributions to any multiemployer plan within the meaning of
the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each
Dentist Plan, either (i) the value of plan assets (including commitments
under insurance contracts) is at least equal to the value of plan liabilities
or (ii) the value of plan liabilities in excess of plan assets is disclosed
on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Dentist, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's
licensed professional employees, and the conduct of the Business and use of
the Assets, have complied with all applicable laws, rules, regulations and
licensing requirements, including, without limitation, the Federal
Environmental Protection Act, the Occupational Safety and Health Act, the
Americans with Disabilities Act and any environmental laws and medical waste
laws, and there exist no violations by Dentist or any licensed professional
employee of Dentist of any Federal, state or local law or regulation.
Dentist has not received any notice of a violation of any Federal, state and
local laws, regulations and ordinances relating to the operations of the
Business and Assets and no notice of any pending inspection or violation of
any such law, regulation or ordinance has been received by Dentist.
2.24 THIRD PARTY PAYORS. Dentist and each licensed professional
employee or independent contractor of Dentist has timely filed all claims or
other reports required to be filed with respect to the purchase of services
by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are
no pending appeals, overpayment determinations, adjustments, challenges,
audit, litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Dentist and each
licensed professional employee of Dentist. Neither Dentist nor any licensed
professional employee of Dentist has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Dentist and Dentist's licensed professional employees have not (a) knowingly
and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Dentist in this Agreement, and no Exhibit or certificate issued or executed
by, or information furnished by Dentist or to be furnished by Dentist to
Pentegra pursuant hereto, or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
or facts contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete
and accurate list of all arrangements that Dentist has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe
<PAGE>
deposit box, etc.) and the person or persons authorized in respect thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No
officer or employee (or their respective spouses, children or affiliates)
owns directly or indirectly, on an individual or joint basis, any interest
in, has a compensation or other financial arrangement with, or serves as an
officer or director of, any customer or supplier or competitor of Dentist or
any organization that has a material contract or arrangement with Dentist.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct
list of the names and addresses of each payor of Dentist's services which
accounted for more than 10% of revenues of Dentist in the preceding fiscal
year. Dentist has good relations with all such payors and other material
payors of Dentist and none of such payors has notified Dentist that it
intends to discontinue its relationship with Dentist or to deny any claims
submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Dentist as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation
duly organized and existing and in good standing under the laws of the State
of Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power
to execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All
building or other permits, certificates of occupancy, concessions, grants,
franchises, licenses, certificates of need and other governmental
authorizations and approvals required for the conduct of the business of
Pentegra or waivers thereof, have been duly obtained and are in full force
and effect, except as would not have a material adverse effect upon Pentegra.
Other than as would not have a material adverse effect, there are no
proceedings pending or, to the knowledge of Pentegra, threatened, which may
result in the revocation, cancellation or suspension, or any adverse
modification, of any such licenses or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material
adverse effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened,
<PAGE>
litigation, governmental investigation, condemnation or other proceeding
against or relating to or affecting Pentegra, its business, assets or the
transactions contemplated by this Agreement, and, to the knowledge of
Pentegra, no basis for any such action exists, nor is there any legal
impediment of which Pentegra has knowledge to the continued operation of its
business or the use of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax
reports and other statements) required to have been filed by it, and has paid
all taxes (including any interest, penalty or additions thereto) required to
have been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any
obligation for any finder's, broker's or similar fees in connection with the
transactions contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of
shares of Pentegra Common Stock in connection with the acquisition
contemplated hereby will be as of the Closing Date duly and validly
authorized by all necessary corporate action on the part of Pentegra. The
Pentegra Common Stock to be issued in connection with the acquisition
contemplated hereby, when issued in accordance with the terms of this
Agreement, will be validly issued, fully paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Dentist pursuant
hereto, or in connection with the transactions contemplated hereby, contains
or will contain any untrue statement of a material fact, or omits or will
omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
SECTION 4. COVENANTS OF DENTIST.
Dentist agrees that between the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his
best efforts to cause the consummation of the transactions contemplated
hereby in accordance with their terms and conditions. Dentist agrees to
complete the Exhibits hereto to be provided by him in form and substance
satisfactory to both Dentist and Pentegra.
4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and
use the Assets in the ordinary course. Dentist shall not enter into any
lease, contract, indebtedness, commitment, purchase or sale or acquire or
dispose of any capital asset relating to the Business or the Assets except in
the ordinary course of business. Dentist shall use their best efforts to
preserve the Business and Assets intact and shall not take any action that
would have an adverse effect on the Business or Assets. Dentist shall use
their best efforts to preserve intact the relationships with payors,
customers, suppliers, patients and others having significant business
relations with Dentist. Dentist shall collect its receivables and pay its
trade payables in the ordinary course of business. Dentist shall not
introduce any new method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its
authorized representatives access to, and make available for inspection, all
of the assets and business of Dentist, the Business and the Assets, including
employees, customers and suppliers and permit Pentegra and its authorized
representatives to
<PAGE>
inspect and make copies of all documents, records and information with
respect to the business or assets of Dentist, the Business or the Assets as
Pentegra or its representatives may request. Dentist shall promptly notify
Pentegra in writing of (a) any notice or communication relating to a default
or event that, with notice or lapse of time or both, could become a default,
under any contract, commitment or obligation to which Dentist is a party or
relating to the Business or the Assets, and (b) any adverse change in
Dentist's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist
shall use his best efforts to secure all necessary approvals and consents of
third parties to the consummation of the transactions contemplated hereby,
including consents described on EXHIBIT 2.4. Dentist shall use his best
efforts to obtain all licenses, permits, approvals or other authorizations
required under any law, rule, regulation, or otherwise to provide the
services of the Practice contemplated by the Service Agreement and to conduct
the intended business of the Practice and operate the Business and use the
Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement
until the earlier of Closing or the termination of this Agreement in
accordance with the provisions hereof, Dentist shall not, and shall use its
best efforts to cause Dentist's employees, agents and representatives not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer, including without
limitation, any proposal or offer to the Dentist, with respect to a merger,
acquisition, consolidation or similar transaction involving, or the purchase
of all or any significant portion of the assets or any equity securities of
Dentist or engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to
such proposal or offer, and Dentist will immediately cease any such
activities, discussions or negotiations heretofore conducted with respect to
any of the foregoing. Dentist shall immediately notify Pentegra if any such
inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby
covenants and agrees that it will take whatever steps are necessary to pay or
fund completely for any accrued benefits, where applicable, or vested accrued
benefits for which Dentist or any entity might have any liability whatsoever
arising from any insurance, pension plan, employment tax or similar
liability of Dentist to any employee or other person or entity (including,
without limitation, any Dentist Plan and any liability under employment
contracts with Dentist) allocable to services performed prior to the Closing
Date. Dentist acknowledges that the purpose and intent of this covenant is
to assure that Pentegra shall have no liability whatsoever at any time after
the Closing Date with respect to any of Dentist's employees or similar
persons or entities, including, without limitation, any Dentist Plan for the
period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior
written approval of Pentegra, except as required by law, increase the cash
compensation of the Dentist (other than in the ordinary course of business)
or other employee or an independent contractor of Dentist, adopt, amend or
terminate any compensation plan, employment agreement, independent contractor
agreement, employee policies and procedures or employee benefit plan, take
any action that could deplete the assets of any employee benefit, or fail to
pay any premium or contribution due or file any report with respect to any
employee benefit plan, or take any other actions with respect to its
employees or employee matters which might have an adverse effect upon
Dentist, its business, assets or prospects.
4.8 [INTENTIONALLY OMITTED].
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his
best efforts to take, or cause to be taken, all actions necessary to effect
the acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any
material respect the tax or financial accounting methods or practices
followed by Dentist (including any material change in any
<PAGE>
assumption underlying, or any method of calculating, any bad debt,
contingency or other reserve), except as may be required by law or generally
accepted accounting principles. Dentist will duly, accurately and timely
(without regard to any extensions of time) file all returns, information
statements and other documents relating to taxes of Dentist required to be
filed by it, and pay all taxes required to be paid by it, on or before the
Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist
hereby waive any compliance with the applicable state Bulk Transfers Act, if
any. Dentist covenants and agrees that all of the creditors with respect to
the Business and the Assets will be paid in full by Dentist prior to the
Closing Date, except to extent that any liability to such creditors is
assumed by Pentegra pursuant to this Agreement. If required by Pentegra,
Dentist shall furnish Pentegra with proof of payment of all creditors with
respect to the Business and the Assets. Notwithstanding the foregoing,
Dentist may dispute the validity or amount of any such creditor's claim
without being deemed to be in violation of this SECTION 4.11, provided that
such dispute is in good faith and does not unreasonably delay the resolution
of the claim and provided, further that Dentist agrees to indemnify and bond
Pentegra for such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Dentist leases any of its premises from the Dentist
or other affiliate of Dentist, Pentegra shall have entered into a building
lease (the "Building Lease") with the owner of such premises on terms and
conditions satisfactory to Pentegra, the terms and conditions of which shall
include, without limitation, (i) a five year initial term plus three
five-year renewal options, (ii) a lease rate equal to the fair market value
lease rate, as agreed to by Pentegra, and (iii) such other provisions to be
acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all
requests made by Pentegra for the purpose of allowing Pentegra to hire those
non-dental employees of Dentist employed by the Dentist as of the Closing
Date, with such employment to be effective as of the Closing Date.
Notwithstanding the above, Dentist shall remain liable under any Dentist
Plans for any claims incurred by any employees or their spouses or
dependents, and for all compensation, bonuses, benefits and other such items
and other liabilities related to Dentist's employees incurred by Dentist
prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that
all employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above,
shall be treated as "leased employees" (as defined in Code Section 414(n)) of
Dentist and shall be treated as Clinic employees for purposes of eligibility
and participation in Dentist Plans.
4.15 INSURANCE. Dentist shall agree to have and shall assist
Pentegra and its affiliates to be named as an additional insured on its
liability insurance programs, effective as of the Closing Date.
4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a
limited liability company, partnership or other legal entity (the "Practice")
for the purpose of practicing dentistry and entering into the Service
Agreement. The Practice shall be duly organized, in existing and in good
standing under the laws of the State in which the Dentist and the Practice
are to practice dentistry. The Practice shall have all necessary power to
own all of its assets and to carry on its business as such business is now
being conducted. The Dentist shall be the sole member/shareholder/partner of
the Practice and own all such interests free of all security interests,
claims, encumbrances and liens. Each interest in the Practice shall be
legally and validly issued and fully paid and nonassessable. There shall be
no outstanding (a) bonds, debentures, notes or other obligations the holders
of which have the right to vote with the members/partners/shareholders of the
Practice on any matter, (b) securities of the Practice convertible into
equity interests in the Practice, or (c) commitments, options, rights or
warrants to issue any such equity interests in the Practice, to issue
securities of the Practice convertible into such equity interests, or to
redeem any securities of the Practice. No interests
<PAGE>
of the Practice shall have been issued or disposed of in violation of the
preemptive rights, rights of first refusal or similar rights of any of the
Practice's members/partners/shareholders. The Practice shall qualify to do
business as a foreign entity in any other state or jurisdiction by reason of
its business, properties or activities in or relating to such other state or
jurisdiction.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation,
Bylaws/Regulations and minutes of the Practice and all amendments thereto of
the Practice shall have been delivered to Pentegra. The minute books of the
Practice shall contain all accurate minutes of the meetings of and consents
to actions taken without meetings of the members\managers/partners/board of
directors of the Practice since its formation. The books of account of the
Practice shall have been kept accurately in the ordinary course of business
and the revenues, expenses, assets and liabilities of the Practice shall have
been properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have
the power to execute, deliver and perform its obligations under all
agreements and other documents to be executed and delivered by it pursuant to
this Agreement, including without limitation, the Service Agreement and each
Employment Agreement to be executed and delivered on the Closing Date, and
has taken all action required by law, its Organization/Partnership
Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to
authorize the execution, delivery and performance of such documents. The
Service Agreement, the Employment Agreement and the other agreements
contemplated hereby shall have been duly executed and delivered by the
Practice on the Closing Date and constitute or will constitute the legal,
valid and binding obligations of the Practice enforceable against the
Practice in accordance with their respective terms, except as may be limited
by applicable bankruptcy, insolvency or similar laws affecting creditors'
rights generally or the availability of equitable remedies. The execution
and delivery of the Service Agreement, the Employment Agreements and the
other agreements contemplated hereby will not violate any provision of the
organizational documents of the Practice or any provisions of, or result in
the acceleration of, any obligation under any mortgage, lien, lease,
agreement, rent, instrument, order, arbitration award, judgment or decree to
which the Practice is a party or by which the Practice is bound, or violate
any material restrictions of any kind to which the Practice is subject, or
result in any lien or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of
Organization/Partnership Agreement/Articles of Incorporation,
Bylaws/Regulations and as of the Closing Date, the Service Agreement and the
Employment Agreements, the Practice shall not be a party to or subject to any
agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with
all applicable laws, regulations and licensing requirements and has filed
with the proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its
best efforts to cause the consummation of the transactions contemplated
hereby in accordance with their terms and provisions. Pentegra and Dentist
agree to complete the Exhibits hereto to be provided by both parties.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra
shall use its best efforts to secure all necessary approvals and consents of
third parties to the consummation of the transactions contemplated hereby.
<PAGE>
SECTION 6. COVENANTS OF PENTEGRA AND DENTIST.
Pentegra and Dentist agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate
to promptly prepare and file with the Securities Exchange Commission ("SEC")
the Registration Statement on Form S-1 (or other appropriate Form) to be
filed by Pentegra in connection with its Initial Public Offering (including
the prospectus constituting a part thereof, the "Registration Statement").
Pentegra shall obtain all necessary state securities laws or "Blue Sky"
permits and approvals required to carry out the transactions contemplated by
this Agreement and the Dentist shall furnish all information concerning
Dentist as may be reasonable requested in connection with any such action.
Dentist represents and warrants that none of the information or
documents supplied or to be supplied by it specifically for inclusion in the
Registration Statement, by exhibit or otherwise, will, at the time the
Registration Statement and each amendment or supplement thereto, if any,
becomes effective under the Securities Act of 1933, 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, in light of
the circumstances under which they were made, not misleading. Dentist shall
be entitled to review the Registration Statement and each amendment thereto,
if any, prior to the time each becomes effective under the Securities Act of
1933.
Dentist shall furnish Pentegra will all information concerning itself
and such other matters as may be reasonable requested by Pentegra in
connection with the preparation of the Registration Statement and each
amendment or supplement thereto, or any other statement, filing, notice or
application made by or on behalf of each such party or any of its
subsidiaries to any governmental entity in connection with the transactions
contemplated by the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Dentist contained herein shall have been true and correct in
all respects when initially made and shall be true and correct in all
respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Dentist prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Dentist shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall
have completed a due diligence review of the business, operations and
financial statements of Dentist, the Business and the Assets, the results of
which shall be satisfactory to Pentegra in its sole discretion.
<PAGE>
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and
Pentegra shall have executed and delivered a mutually agreeable Service
Agreement (the "Service Agreement"), which may be in the form attached hereto
as EXHIBIT 7.7, and otherwise satisfactory to Dentist and Pentegra, pursuant
to which Pentegra will provide management services to the Practice. Dentist
shall have executed and delivered a mutually agreeable Guaranty Agreement
which may be in the form attached as EXHIBIT 4.10, and otherwise
satisfactory to Dentist and Pentegra, of the Service Agreement pursuant to
which Dentist shall, among other things, guaranty the obligations of the
Practice under the Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or
her employment agreement and executed a mutually agreeable employment
agreement ("Employment Agreement") with the Practice which may be in the
form attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Dentist and
Pentegra.
7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all
necessary government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all
documents, duly executed in form satisfactory to Pentegra and its counsel,
referred to in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness,
receivables or payables between Dentist and its affiliates and Dentist shall
not have any liabilities, including indebtedness, guaranties and capital
leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Dentist shall have named Pentegra as an additional
insured on its liability insurance program in accordance with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no
material change in the working capital of Dentist since the Balance Sheet
Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. DENTIST'S CONDITIONS PRECEDENT.
The obligations of Dentist hereunder are subject to fulfillment at or
prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Pentegra contained herein shall have been true and correct in
all respects when initially made and shall be true and correct in all
respects as of the Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior
<PAGE>
to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Dentist shall have received all
documents, duly executed in form satisfactory to Dentist and its counsel,
referred to in SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF DENTIST. On or before the Closing Date, Dentist
shall deliver to Pentegra the following, all of which shall be in a form
satisfactory to counsel to Pentegra and shall be held by Jackson & Walker,
L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an
escrow agreement or letter agreement in form and substance mutually
acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a bill of sale conveying the Assets to Pentegra;
(d) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(e) certificates of Dentist dated as of the Closing Date, (i) as
to the truth and correctness of the representations and warranties of Dentist
contained herein; (ii) as to the performance of and compliance by Dentist
with all covenants contained herein; and (iii) certifying that all conditions
precedent of Dentist to the Closing have been satisfied;
(f) an opinion of counsel to Dentist opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Dentist, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Pentegra;
(g) non-foreign affidavits executed by Dentist;
(h) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
<PAGE>
(i) an executed Registration Rights Agreement between Pentegra and
Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(j) such other instruments and documents as reasonably requested
by Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date,
Pentegra shall deliver to Dentist the following, all of which shall be in a
form satisfactory to counsel to Dentist and shall be held by Jackson &
Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to
an escrow agreement or letter agreement in form and substance mutually
acceptable to the parties hereto:
(a) the Acquisition Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of
Pentegra (or a committee thereof) authorizing the execution, delivery and
performance of this Agreement and all related documents and agreements each
certified by the Secretary as being true and correct copies of the original
thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to
the incumbency of the directors and officers of Pentegra and as to the
signatures of such directors and officers who have executed documents
delivered at the Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Dentist;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Dentist;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested
by Dentist to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this
Agreement or in any Exhibit
<PAGE>
attached hereto, any agreement executed pursuant hereto, and any certificate
executed and delivered by any party pursuant to the terms of this Agreement,
shall constitute representations and warranties of Dentist or of Pentegra, as
the case may be. All such representations and warranties, and all
representations and warranties expressly labeled as such in this Agreement
shall survive the date of this Agreement and the Closing Date for a period of
five (5) years following the Closing Date, except that (i) the
representations and warranties with respect to environmental and medical
waste laws and health care laws and matters shall survive for a period of
fifteen (15) years and tax representations shall survive until one year after
the expiration of the applicable statute of limitations. Each party
covenants with the other parties not to make any claim with respect to such
representations and warranties, against any party after the date on which
such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof,
unless such party has timely given the notice required in SECTION 10.2, 10.3
or 10.4 hereof, as the case may be. Each party hereby releases, acquits and
discharges the other party from any and all claims and demands, actions and
causes of action, damages, costs, expenses and rights of setoff with respect
to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable,
are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS
SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"),
SHALL INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE
EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND
AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS,
DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY,
AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE
FURNISHED BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS,
AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR
ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT
COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
(D) ANY LIABILITY OF PENTEGRA FOR COSTS AND EXPENSES (INCLUDING,
WITHOUT LIMITATION, ATTORNEY'S FEES) INCURRED IN CONNECTION WITH THE
NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH.
<PAGE>
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS
SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"),
SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS,
SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND
EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR
WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY,
AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO
BE FURNISHED BY INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S
MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE
ASSETS, AND
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES,
AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON
OR AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS
GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION
ARISING OUT OF OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS
SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR
AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING,
WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE
NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
<PAGE>
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR
ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT
COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED
TO PENTEGRA OR ITS COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY
PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING
A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT
OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL
FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE
THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after
Indemnified Person receives written notice of the commencement of any action
or other proceeding in respect of which indemnification or reimbursement may
be sought hereunder, or within such lesser time as may be provided by law for
the defense of such action or proceeding, such Indemnified Person shall
notify Indemnitor thereof. If any such action or other proceeding shall be
brought against any Indemnified Person, Indemnitor shall, upon written notice
given within a reasonable time following receipt by Indemnitor of such notice
from Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Dentist giving rise to
indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be
entitled to offset the amount of damages incurred by it as a result of such
breach of warranty, representation, covenant or agreement against any amounts
payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
<PAGE>
(b) at any time by Pentegra if any representation or warranty of
Dentist contained in this Agreement or in any certificate or other document
executed and delivered by Dentist pursuant to this Agreement is or becomes
untrue or breached in any material respect or if Dentist fails to comply in
any material respect with any covenant or agreement contained herein, and any
such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
(c) at any time by Dentist if any representation or warranty of
Pentegra contained in this Agreement or in any certificate or other document
executed and delivered by Pentegra pursuant to this Agreement is or becomes
untrue or breached in any material respect or if Pentegra fails to comply in
any material respect with any covenant or agreement contained herein and such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra or Dentist if the transaction contemplated hereby shall
not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Dentist, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the
Closing Date, Dentist shall not voluntarily (a) sell, assign, exchange,
transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i)
any shares of Pentegra Common Stock received as consideration by such party
hereunder, (ii) any interest (including without limitation, an option to buy
or sell) in any shares of Pentegra Common Stock, received by any party
hereunder as consideration, in whole or in part, and no such attempted
transfer shall be treated as effective for any purpose or (b) engage in any
transaction, whether or not with respect to any shares of Pentegra Common
Stock or any interest therein, received by any party hereunder as
consideration, the intent or effect of which is to reduce the risk of owning
shares of Pentegra Common Stock. The certificates evidencing the Pentegra
Common Stock delivered to Dentist pursuant to the terms hereof will bear a
legend substantially in the form set forth below and containing such other
information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily
sold, assigned, exchanged, transferred, encumbered, pledged,
distributed, appointed or otherwise disposed of, and the issuer shall
not be required to give effect to any attempted voluntary sale,
assignment, exchange, transfer, encumbrance, pledge, distribution,
appointment or other disposition prior to _________
[date that is one year from the Closing Date]. Upon the written
request of the holder of this certificate, the issuer agrees to
remove this restrictive legend (and any stop order placed with the
transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that
the shares of Pentegra Common Stock to be delivered to Dentist pursuant to
this Agreement have not been and will not be registered under the Securities
Act of 1933 and may not be resold without compliance with the Securities Act
of 1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this
Agreement is being acquired solely for its own account, for investment
purposes only and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution. Dentist
covenants, warrants and represents that none of the shares of Pentegra Common
Stock issued to it will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after full compliance with all
<PAGE>
of the applicable provisions of the Securities Act, as amended, and the rules
and regulations of the Securities Exchange Commission and applicable state
securities laws and regulations. All certificates evidencing shares of
Pentegra Common Stock shall bear the following legend in addition to the
legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the
Securities Act of 1933 (the "Act") and may only be sold or otherwise
transferred if the holder hereof complies with the Act and applicable
securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock
shall bear any legend required by the securities or blue sky laws of any
state where Dentist resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the
economic risk of an investment in Pentegra Common Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and
has such knowledge and experience in financial and business matters that they
are capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect its own interests in connection with
the acquisition of the Pentegra Common Stock. Dentist and its
representatives have had an adequate opportunity to ask questions and receive
answers from the officers of Pentegra concerning any and all matters relating
to the background and experience of the officers and directors of Pentegra,
the plans for the operations of the business of Pentegra, and any plans for
additional acquisitions and the like. Dentist and its representatives have
asked any and all questions in the nature described in the preceding sentence
and all questions have been answered to their satisfaction. Dentist is an
"accredited investor" as defined in Regulation D of the Securities Act of
1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes
and acknowledges that it had in the past, currently have, and in the future
may possibly have, access to certain confidential information of Pentegra
that is a valuable, special and unique asset of Pentegra's businesses.
Dentist agrees that it will not disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or
reason whatsoever, unless (i) such information becomes available to or known
by the public generally through no fault of Dentist, (ii) disclosure is
required by law or the order of any governmental authority under color of
law, provided, that prior to disclosing any information pursuant to this
clause (ii), Dentist shall, if possible, give prior written notice thereof to
the other parties hereto, and provide such other parties hereto with the
opportunity to contest such disclosure, (iii) Dentist reasonably believes
that such disclosure is required in connection with the defense of a lawsuit
against the disclosing party, or (iv) Dentist is the sole and exclusive owner
of such confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Dentist of the provisions of this SECTION 13, Pentegra shall be entitled to
an injunction restraining Dentist from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
Pentegra from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages. The obligations of the
parties under this SECTION 13 shall survive the termination of this Agreement.
Pentegra recognizes and acknowledges that it had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Dentist that is a valuable, special and unique asset of
Dentist. Pentegra agrees that it will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, unless (i) such information becomes
available to or known by the public generally through no fault of Pentegra,
(ii) disclosure is required by law or the order of any governmental authority
under color of law, provided, that prior to disclosing any information
pursuant to this clause (ii), Pentegra shall, if possible, give prior written
notice thereof to the other parties hereto, and provide such other parties
hereto with the opportunity to contest such disclosure, (iii) Pentegra
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit
<PAGE>
against the disclosing party, or (iv) Pentegra is the sole and exclusive
owner of such confidential information as a result of the transaction
contemplated hereunder or otherwise. In the event of a breach or threatened
breach by Pentegra of the provision of this SECTION 13. Dentist shall be
entitled to an injunction restraining Pentegra from disclosing, in whole or
in part, such confidential information. Nothing herein shall be construed as
prohibiting Pentegra from pursuing any other available remedy for such breach
or threatened breach, including the recovery of damages. The obligations of
the parties under this SECTION 13 shall survive the termination of this
Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions
contemplated by this Agreement, together with the transactions contemplated
by the Other Agreement and the Initial Public Offering, will qualify as an
exchange meeting the requirements of Section 351 of the Code. The tax
returns (and schedules thereto) of Dentist and Pentegra shall be filed in a
manner consistent with such intention and Dentist and Pentegra shall each
provide the other with such tax information, reports, returns or schedules as
may be reasonably required to assist the other in so reporting the
transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Dentist:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
<PAGE>
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any
further acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of
the parties to this Agreement shall pay all of the costs and expenses
incurred by such party in connection with the transactions contemplated by
this Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Dentist for services rendered in
connection with negotiating and closing the transactions contemplated by this
Agreement or the documents to be executed in connection herewith, whether or
not such costs or expenses are incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and
its terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Dentist.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF
TEXAS AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made
for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this
Agreement are integral parts of this Agreement as if fully set forth herein,
and all statements appearing therein shall be deemed disclosed for all
purposes and not only in connection with the specific representation in which
they are explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS AND THE ESCROW LETTER ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT
OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS
BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one and the
same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding
on, and shall inure to the benefit of, the parties hereto, and their
respective successors and assigns, and no other person shall acquire or have
any right under or by virtue of this Agreement. No party may assign any
right or obligation hereunder without the prior written consent of the other
parties; provided, however, that Pentegra may assign its rights and delegate
its obligations hereunder to any entity that is an affiliate of Pentegra.
For
<PAGE>
purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Dentist, be relieved from its obligations
to Dentist under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Dentist, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified
or supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Dentist (hereinafter referred to as a "Party"), whether made before or after
the institution of any legal proceeding, any dispute among the parties hereto
in any way arising out of, related to, or in connection with this Agreement
(hereinafter a "Dispute"), shall be resolved by binding arbitration in
accordance with the terms of this Section (hereinafter the "Arbitration
Program").
All Disputes between the Parties shall be resolved by binding
arbitration administered by the American Arbitration Association (the "AAA")
in accordance with the terms of this Arbitration Program, the Commercial
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or foreclosing upon any
personal property in which there has been granted a security interest or lien
by a Party in the Documents. In Disputes involving indebtedness or other
monetary obligations, each Party agrees that the other Party may proceed
against all liable persons, jointly and severally against one or more of
them, without impairing rights against other liable persons. Nor shall a
Party be required to join the principal obligor or any other liable persons
(e.g., sureties or guarantors) in any proceeding against a particular person.
A Party may release or settle with one or more liable persons as the Party
deems fit without releasing or impairing rights to proceed against any
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute;
<PAGE>
and each Party shall, within twenty (20) days from the date such notification
is received, select an arbitrator, and those two arbitrators shall select a
third arbitrator within ten (10) days thereafter. The issues or claims in
dispute shall be committed to writing, separately stated and numbered, and
each party's proposed answers or contentions shall be signed below the
questions. Failure by a party to select an arbitrator within the prescribed
time period shall serve as that Party's acquiescence and acceptance of the
other party's selection of arbitrator. The arbitrators shall resolve all
Disputes in accordance with the applicable substantive law. Any Dispute
shall be decided by a majority vote of three arbitrators, unless the claim or
amount in controversy does not exceed $100,000.00, in which case a single
arbitrator (who shall have authority to render a maximum award of
$100,000.00, including all damages of any kind, costs and fees) may decide
the Dispute. The arbitrators may grant any remedy or relief that the
arbitrators deem just and equitable and within the scope of this Arbitration
Program. The arbitrators may also grant such ancillary relief as is
necessary to make effective the award. In all arbitration proceedings the
arbitrators shall make specific and written findings of fact and conclusions
of law. In all arbitration proceedings in which the amount in controversy
exceeds $100,000.00, in the aggregate, the Parties shall have in addition to
the statutory right to seek vacation or modification of any award pursuant to
applicable law, the right to seek vacation or modification of any award that
is based in whole, or in part, on an incorrect or erroneous ruling of law by
appeal to an appropriate court having jurisdiction; provided, however, that
any such application for vacation or modification of an award based on an
incorrect ruling of law must be filed in a court having jurisdiction over the
Dispute within 15 days from the date the award in rendered. The arbitrators'
findings of fact shall be binding on all Parties and shall not be subject to
further review except as otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoenix,
Arizona or the headquarters of Pentegra if other than Phoenix, Arizona.
The provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or by
applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
PENTEGRA DENTAL GROUP, INC.
By: /s/ James L. Dunn, Jr.
-------------------------------
Its: Senior Vice President
-------------------------------
/s/ Terrence C. O'Keefe, D.D.S.
-----------------------------------
Terrence C. O'Keefe, D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
- ------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 [intentionally omitted]
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
HAROLD A. PEBBLES, D.D.S., P.C.,
and
HAROLD PEBBLES, D.D.S.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Section 1. TERMS OF THE REORGANIZATION
1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . . . . 2
1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 4
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 9
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 12
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 13
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 13
Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 14
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 14
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 14
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 14
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 14
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 15
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 15
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 15
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . . . . 15
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 17
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . . . 18
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 19
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 20
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 21
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . . . 22
14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . 22
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . 23
14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and
executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC.,
a Delaware corporation ("Pentegra"), HAROLD A. PEBBLES, D.D.S., P.C., a
Washington professional corporation ("Company") and HAROLD PEBBLES, D.D.S.,
shareholders of Company (referred to herein as "Shareholder" or
"Shareholders").
WITNESSETH:
WHEREAS, Company operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, the Boards of Directors of the Company and Pentegra have
determined that a reorganization between each of them is in the best interests
of their respective companies;
WHEREAS, Pentegra or its affiliated designee has entered into or intends to
enter into Agreements and Plans of Reorganization, Asset Contribution Agreements
and other acquisition agreements (collectively, the "Other Agreements") with
such persons or entities or the stockholders of such entities listed on EXHIBIT
A (together with Company, the "Target Companies") and simultaneously with the
closing of the reorganization contemplated herein, intends to consummate its
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock");
WHEREAS, it is intended for Federal income tax purposes that the
reorganization contemplated by this Agreement shall qualify as an reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION
1. TERMS OF THE REORGANIZATION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock
is consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".
1.2 MERGER. Subject to and upon the terms and conditions contained
herein, on the Closing Date, the Company shall be merged with and into Pentegra
(or its designated affiliate, in which case, the references herein to Pentegra
shall be to such designated affiliate and its shares of common stock) in
accordance with this Agreement and the separate corporate existence of the
Company shall thereupon cease
<PAGE>
("Merger"). Pentegra shall be the surviving corporation in the Merger
("Surviving Corporation") and shall continue to be governed by the laws of
the State of Delaware and the separate corporate existence of Pentegra with
all rights, privileges, powers, immunities and purposes shall continue
unaffected by the Merger. The Merger shall have the effects specified in the
Delaware General Corporation Law and the Washington Business Corporation Law.
If all the conditions to the Merger set forth herein shall have been
fulfilled or waived in accordance herewith and this Agreement shall not have
been terminated in accordance herewith, the parties hereto shall cause to be
properly executed and filed on the Closing Date Certificates of Merger for
the Company meeting the applicable legal requirements. The Mergers shall
become effective on the Closing Date or the filing of such documents, in
accordance with applicable law, or at such later time as the parties hereto
have agreed upon and designated in such merger filings.
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of
Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation
and Bylaws of the Surviving Corporation until duly amended in accordance with
their terms.
1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra
immediately prior to the effective date of the Merger shall be the directors of
the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
Bylaws. The persons who are officers of Pentegra immediately prior to the
effective date of the Merger shall be the officers of the Surviving Corporation
and shall hold their respective offices until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal.
1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and
without any action on the part of the holder thereof, all shares of the
Company's common stock issued and outstanding on the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired and
shall cease to exist, and each holder of a certificate of representing shares of
Company common stock shall thereafter cease to have any rights with respect to
such shares except the right to receive the consideration set forth on ANNEX I
attached hereto (the "Merger Consideration"). Each share of common stock of
the Company held in treasury at the effective date of the Merger shall cease to
be outstanding and shall be cancelled and retired without payment of any
consideration therefor. On the effective date of the Merger, each share of
Pentegra Common Stock issued and outstanding shall, by virtue of he Mergers, and
without any action on the part of the holder thereof, continue unchanged and
remain outstanding as a share of validly issued, fully paid and nonassessable
share of Surviving Corporation common stock.
1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger,
the Shareholders, as the holders of a certificate or certificates representing
shares of Company common stock shall, upon surrender of such certificate or
certificates, receive the Merger Consideration, and until the certificate or
certificates of Company common stock shall have been surrendered by the
Shareholder and replaced by a certificate or certificates representing Pentegra
Common Stock (as set forth on ANNEX I), the certificate or certificates of
Company common stock shall, for all purposes be deemed to evidence ownership of
the number of shares of Pentegra Common Stock determined in accordance with the
provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the
Shareholders in the Merger shall be deemed for all purposes to have been issued
by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at
Closing the certificate or certificates representing the Company common stock
owned by them, duly endorsed in blank by the Shareholders, or accompanied by
duly executed blank stock powers, and with all necessary transfer tax and other
revenue stamps, acquired at the Shareholder's expense, affixed and cancelled.
1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under
<PAGE>
any of the Assets or otherwise to carry out this Agreement, in return for the
consideration set forth in this Agreement, the Company and Shareholders shall
excecute and deliver all such deeds, bills of sale, assignments and
assurances and take and do all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under the Assets in Pentegra or otherwise to carry
out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional
corporation or association, as applicable, duly organized, validly existing and
in good standing under the laws of the State of Washington. Company has all
necessary corporate powers to own all of its assets and to carry on its business
as such business is now being conducted. Company does not own stock in or
control, directly or indirectly, any other corporation, association or business
organization, nor is Company a party to any joint venture or partnership. The
Shareholders are the sole shareholders of Company and own all outstanding shares
of capital stock free of all security interests, claims, encumbrances and liens
in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock
has been legally and validly issued and fully paid and nonassessable. No shares
of capital stock of Company are owned by Company in treasury. There are no
outstanding (a) bonds, debentures, notes or other obligations the holders of
which have the right to vote with the stockholders of Company on any matter, (b)
securities of Company convertible into equity interests in Company, or (c)
commitments, options, rights or warrants to issue any such equity interests in
Company, to issue securities of Company convertible into such equity interests,
or to redeem any securities of Company. No shares of capital stock of Company
have been issued or disposed of in violation of the preemptive rights, rights of
first refusal or similar rights of any of Company's stockholders. Company is
not required to qualify to do business as a foreign corporation in any other
state or jurisdiction by reason of its business, properties or activities in or
relating to such other state or jurisdiction. Company does not have any assets,
employees or offices in any state other than the state set forth in the first
sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power
to execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all action required by
law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to
authorize the execution, delivery and performance of this Agreement and such
related documents. Each Shareholder has the legal capacity to enter into and
perform this Agreement and the other agreements to be executed and delivered in
connection herewith. Company has obtained the approval of its stockholders
necessary to the consummation of the transactions contemplated herein. This
Agreement and all agreements and documents executed and delivered in connection
herewith have been, or will be as of the Closing Date, duly executed and
delivered by Company and Shareholders, as appropriate, and constitute or will
constitute the legal, valid and binding obligations of Company and Shareholders,
enforceable against Company and Shareholders in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of consents
described on EXHIBIT 2.4, the consummation of the actions contemplated hereby
will not, violate any provision of the Articles or Certificate of Incorporation
or Bylaws of Company or any provisions of, or result in the acceleration of, any
obligation under any mortgage, lien, lease, agreement, rent, instrument, order,
arbitration award, judgment or decree to which Company or any Shareholder is a
party or by which Company or any Shareholder is bound, or violate any material
restrictions of any kind to which Company is subject, or result in any lien or
encumbrance on any of Company's assets or the Assets.
<PAGE>
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets, or
waivers thereof, have been duly obtained and are in full force and effect and
are described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Company and Shareholders, threatened, which may result in the
revocation, cancellation or suspension, or any adverse modification, of any such
licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Company or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been declared or paid by Company on any of its capital stock
since the Balance Sheet Date. No repurchase of any of Company's capital stock
has been approved, effected or is pending, or is contemplated by Company.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Company and all amendments
thereto have been delivered to Pentegra. The minute books of Company contain
accurate minutes of all meetings of and consents to actions taken without
meetings of the Board of Directors and stockholders of Company since its
formation. The books of account of Company have been kept accurately in the
ordinary course of business and the revenues, expenses, assets and liabilities
of Company have been properly recorded in such books.
2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any related
unaudited statements of income, retained earnings, schedule of accounts
receivable, accounts payable and accrued liabilities, and cash flows for the
twelve months then ended (collectively, with the related notes thereto, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and results of operations of Company as of the dates and for the
periods indicated and reflect all fixed and contingent liabilities of Company.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Company or any Shareholder leases, as lessor or lessee, real
or personal property used in operating the Business, related to the Assets or
otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in
accordance with their respective terms, and there is not under any such lease
any existing default by Company, as lessor or lessee, or any condition or event
of which any Shareholder or Company has knowledge which with notice or lapse of
time, or both, would constitute a default, in respect of which Company or
Shareholders have not taken adequate steps to cure such default or to prevent a
default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Company and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set
forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to
<PAGE>
the Closing Date and evidence of such releases of liens and claims shall be
provided to Pentegra on the Closing Date and the Assets shall not be used to
satisfy such liens, claims or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned or
used by Company, are in good, current, standard and merchantable condition and
are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Company has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Company, including the names of any entities from whom Company previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Company in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Company has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on
EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this
Agreement of: (a) the name of each director and officer of Company and the
offices held by each, (b) the most recent payroll report of Company, showing all
current employees of Company and their current levels of compensation, (c)
promised increases in compensation of employees of Company that have not yet
been effected, (d) oral or written employment agreements, consulting agreements
or independent contractor agreements (and all amendments thereto) to which
Company is a party, copies of which have been delivered to Pentegra, and (e) all
employee manuals, materials, policies, procedures and work-related rules, copies
of which have been delivered to Pentegra. Company is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Company has not engaged in any unfair labor practice.
There are no unfair labor practices charges or complaints pending or threatened
against Company, and Company has never been a party to any agreement with any
union, labor organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the Business
nor any of the Assets is subject to any pending, nor does Company or any
Shareholder have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Company, any Shareholder, the Business, the Assets or the transactions
contemplated by this Agreement, and, to the knowledge of Company and
Shareholders, no basis for any such action exists, nor is there any legal
impediment of which Company or any Shareholder has knowledge to the continued
operation of its business or the use of the Assets in the ordinary course,
subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Company has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts, obligations
and commitments of Company ("Contracts"), entered into in connection with and
related to the Assets or the Business, all of which are listed or incorporated
by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case
of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than
leases) attached hereto. Except as otherwise indicated on such Exhibits, all of
such Contracts are valid, binding and enforceable in accordance with their terms
and are in full force and effect, and no defenses, offsets or counterclaims have
been asserted or may be made by any party thereto. Except as indicated on such
Exhibits, there is not under any such Contract any existing default
<PAGE>
by Company or any Shareholder, or any condition or event of which Company or
any Shareholder has knowledge which with notice or lapse of time, or both,
would constitute a default. Company and Shareholders have no knowledge of
any default by any other party to such Contracts. Company and Shareholders
have not received notice of the intention of any party to any Contract to
cancel or terminate any Contract and have no reason to believe that any
amendment or change to any Contract is contemplated by any party thereto.
Other than those contracts, obligations and commitments listed on EXHIBIT
2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material
written or oral agreement contract, lease or arrangement, including without
limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product or
service;
(h) Loan agreement or other contract for money borrowed or lent or to
be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of the
Company or Shareholders, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Company on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) or entered into any contract, lease, license or
commitment, except in connection with the performance of this Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued, contingent
or otherwise) other than (i) liabilities shown or reflected on the Balance
Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary
course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
<PAGE>
(d) Made any payments to or loaned any money to any person or entity
other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have been
required due to income or operations of Company since the Balance Sheet Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants or
agents, or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of any officer, employee, consultant or agent;
(j) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties, assets
or business or the Business or the Assets, or experienced any other material
adverse change in its financial condition, assets, prospects, liabilities or
business;
(n) Declared or paid a distribution, payment or dividend of any kind
on the capital stock of Company;
(o) Repurchased, approved any repurchase or agreed to repurchase any
of Company's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Company has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it. All such tax returns are complete and accurate in all respects and
properly reflect the relevant taxes for the periods covered thereby. Company
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Company. There are no audits relating to taxes of
Company pending or in process or, to the knowledge of Company, threatened.
Company is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency. There are no
liens or encumbrances relating to taxes on or threatened against any of the
assets of Company. Company has withheld
<PAGE>
and paid all taxes required by law to have been withheld and paid by it.
Neither Company nor any predecessor of Company is or has been a party to any
tax allocation or sharing agreement or a member of an affiliated group of
corporations filing a consolidated Federal income tax return. Company has
delivered to Pentegra correct and complete copies of Company's three most
recently filed annual state, local and Federal income tax returns, together
with all examination reports and statements of deficiencies assessed against
or agreed to by Company during the three calendar year period preceding the
date of this Agreement. Company has neither made any payments, is obligated
to make any payments, or is a party to any agreement that under any
circumstance could obligate it to make any payments that will not be
deductible under Code section 280G.
(b) No Shareholder presently intends to dispose of any of the shares of
Pentegra Common Stock to be received hereunder nor is a party to any plan,
arrangement or agreement for the disposition of such shares. Company and
Shareholders have no knowledge, after due inquiry, of any such intent, plan,
arrangement or agreement by any Shareholder. Nothing contained herein shall
prohibit Shareholders from selling such shares of Pentegra Common Stock after
the designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated by
this Agreement which may be now or hereafter asserted against Pentegra, Company
or Company's shareholders resulting from any action taken by Company or any
Shareholder or their respective agents or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against
on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and
has not incurred since that date and will not have incurred as of the Closing
Date, any liabilities or obligations of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, other than those
incurred in the ordinary course of business or as set forth on EXHIBIT 2.16.
Company and Shareholders do not know, or have reasonable grounds to know, of any
basis for the assertion against Company or any Shareholder as of the Balance
Sheet Date, of any claim or liability of any nature in any amount not fully
reflected or reserved against on the Balance Sheet, or of any claim or liability
of any nature arising since that date other than those incurred in the ordinary
course of business or contemplated by this Agreement. All indebtedness of
Company (including without limitation, indebtedness for borrowed money,
guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached
hereto.
2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed
professional of Company carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the industry.
Valid and enforceable policies in such amounts are outstanding and duly in force
and will remain duly in force through the Closing Date. All such policies are
described in EXHIBIT 2.20 attached hereto and true and correct copies have been
delivered to Pentegra. Neither Shareholders nor Company have not received
notice or other communication from the issuer of any such insurance policy
cancelling or amending such policy or threatening to do so. Neither Company,
nor any Shareholder nor any licensed professional employee of Company has any
outstanding claims, settlements or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached
hereto, Company has neither established, nor maintains, nor is obligated to make
contributions to or under or otherwise participate in, (a) any bonus or other
type of compensation or employment plan, program, agreement, policy, commitment,
contract or arrangement (whether or not set forth in a written document); (b)
any pension, profit-sharing, retirement or other plan, program or arrangement;
or (c) any other employee benefit plan, fund or program, including, but not
limited to, those described in SECTION 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT
2.20 (individually "Company
<PAGE>
Plan," and collectively "Company Plans") have been operated and administered
in all material respects in accordance with all applicable laws, rules and
regulations, including without limitation, ERISA, the Internal Revenue Code
of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment
Act of 1967, as amended, and the related rules and regulations adopted by
those Federal agencies responsible for the administration of such laws. No
act or failure to act by Company has resulted in a "prohibited transaction"
(as defined in ERISA) with respect to the Company Plans. No "reportable
event" (as defined in ERISA) has occurred with respect to any of the Company
Plans. Company has not previously made, is not currently making, and is not
obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Company Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at least equal to the
value of plan liabilities or (ii) the value of plan liabilities in excess of
plan assets is disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing
Date, a party to any agreement or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree, rule or
regulation that materially and adversely affects the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Company,
the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's
licensed professional employees, and the conduct of the Business and use of the
Assets, have complied with all applicable laws, rules, regulations and licensing
requirements, including, without limitation, the Federal Environmental
Protection Act, the Occupational Safety and Health Act, the Americans with
Disabilities Act and any environmental laws and medical waste laws, and there
exist no violations by Company, any Shareholder or any licensed professional
employee of Company of any Federal, state or local law or regulation. Company
and Shareholders have not received any notice of a violation of any Federal,
state and local laws, regulations and ordinances relating to the operations of
the Business and Assets and no notice of any pending inspection or violation of
any such law, regulation or ordinance has been received by Company.
2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed
professional employee or independent contractor of Company has timely filed all
claims or other reports required to be filed with respect to the purchase of
services by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are no
pending appeals, overpayment determinations, adjustments, challenges, audit,
litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Company, any Shareholder
and each licensed professional employee of Company. Neither Company, nor any
Shareholder, nor any licensed professional employee of Company has been
convicted of, or pled guilty or nolo contendere to, patient abuse or negligence,
or any other Medicare or Medicaid program related offense and none has committed
any offense which may serve as the basis for suspension or exclusion from the
Medicare and Medicaid programs or any other third party payor program. With
respect to payors, Company, Shareholders and Company's licensed professional
employees has not (a) knowingly and willfully making or causing to be made a
false statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in determining
rights to any benefit or payment; (c) failed to disclose knowledge of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company
or Shareholders in this Agreement, and no Exhibit or certificate issued or
executed by, or information furnished by, officers or directors of Company or
any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or
in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a
<PAGE>
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Company has with any bank or other
financial institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Company, or their respective spouses,
children or affiliates, owns directly or indirectly, on an individual or joint
basis, any interest in, has a compensation or other financial arrangement with,
or serves as an officer or director of, any customer or supplier or competitor
of Company or any organization that has a material contract or arrangement with
Company.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of
the names and addresses of each payor of Company's services which accounted for
more than 10% of revenues of Company in the preceding fiscal year. Company has
good relations with all such payors and other material payors of Company and
none of such payors has notified Company that it intends to discontinue its
relationship with Company or to deny any claims submitted to such payor for
payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Company and Shareholders as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions required
by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize
the execution, delivery and performance of this Agreement and such related
documents. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing Date,
duly executed and delivered by Pentegra and constitute or will constitute the
legal, valid and binding obligations of Pentegra, enforceable against Pentegra
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and delivery
of this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and, the
consummation of the actions contemplated hereby will not, violate any provision
of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or decree
to which Pentegra is a party or by which Pentegra is bound, or violate any
material restrictions of any kind to which Pentegra is subject, or result in any
lien or encumbrance on any of Pentegra's assets. Other than as have been
obtained or as would not have a material adverse effect, there are no consents
of any person or entity required for the transaction contemplated hereby on
behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon
<PAGE>
Pentegra. Other than as would not have a material adverse effect, there are
no proceedings pending or, to the knowledge of Pentegra, threatened, which
may result in the revocation, cancellation or suspension, or any adverse
modification, of any such licenses or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any pending,
nor does Pentegra have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Pentegra, its business, assets or the transactions contemplated by
this Agreement, and, to the knowledge of Pentegra, no basis for any such action
exists, nor is there any legal impediment of which Pentegra has knowledge to the
continued operation of its business or the use of its Assets in the ordinary
course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports and
other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it, other than as would not have a material adverse effect. Pentegra
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Pentegra. There are no audits relating to taxes of
Pentegra pending or in process or, to the knowledge of Pentegra, threatened.
Pentegra is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the reorganization contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the reorganization contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra
in this Agreement, and no Exhibit or certificate issued by officers or directors
of Pentegra and furnished or to be furnished to Company or any Shareholder
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, agree that between the
date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall
use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Company and
Shareholders agree to complete the Exhibits hereto to be provided by them in
form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the
Business and use the Assets in the ordinary course. Company and Shareholders
shall not enter into any lease, contract, indebtedness, commitment, purchase or
sale or acquire or dispose of any capital asset relating to the Business or the
Assets except in the ordinary course of business. Company and Shareholders
shall use their best efforts to preserve the Business and Assets intact and
shall not take any action that would have an adverse effect on the Business or
Assets. Company and Shareholders shall use their best efforts to preserve
intact the
<PAGE>
relationships with payors, customers, suppliers, patients and others
having significant business relations with Company. Company and Shareholders
shall collect its receivables and pay its trade payables in the ordinary
course of business. Company and Shareholdes shall not introduce any new
method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and
its authorized representatives access to, and make available for inspection, all
of the assets and business of Company, the Business and the Assets, including
employees, customers and suppliers and permit Pentegra and its authorized
representatives to inspect and make copies of all documents, records and
information with respect to the business or assets of Company, the Business or
the Assets as Pentegra or its representatives may request. Company and
Shareholders shall promptly notify Pentegra in writing of (a) any notice or
communication relating to a default or event that, with notice or lapse of time
or both, could become a default, under any contract, commitment or obligation to
which Company is a party or relating to the Business or the Assets, and (b) any
adverse change in Company's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and
Shareholders shall use their best efforts to secure all necessary approvals and
consents of third parties to the consummation of the transactions contemplated
hereby, including consents described on EXHIBIT 2.4. Company and Shareholders
shall use their best efforts to obtain all licenses, permits, approvals or other
authorizations required under any law, rule, regulation, or otherwise to provide
the services of the Practice contemplated by the Service Agreement and to
conduct the intended business of the Practice and operate the Business and use
the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of Closing or the termination of this Agreement in accordance with the
provisions hereof, Company and Shareholders shall not, and shall use its best
efforts to cause Company's employees, agents and representatives not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer, including without limitation,
any proposal or offer to any Shareholder, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of Company or engage
in any negotiations concerning, or provide any confidential information or data
to, or have any discussions with, any person relating to such proposal or offer,
and Company and Shareholders will immediately cease any such activities,
discussions or negotiations heretofore conducted with respect to any of the
foregoing. Company and Shareholders shall immediately notify Pentegra if any
such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund completely
for any accrued benefits, where applicable, or vested accrued benefits for which
Company or any entity might have any liability whatsoever arising from any
insurance, pension plan, employment tax or similar liability of Company to any
employee or other person or entity (including, without limitation, any Company
Plan and any liability under employment contracts with Company) allocable to
services performed prior to the Closing Date. Company and Shareholders
acknowledge that the purpose and intent of this covenant is to assure that
Pentegra shall have no unfunded liability whatsoever at any time after the
Closing Date with respect to any of Company's employees or similar persons or
entities, including, without limitation, any Company Plan for the period prior
to the Closing Date.
4.7 EMPLOYEE MATTERS. Company shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of any Shareholder (other than in the ordinary course of business) or other
employee or an independent contractor of Company, adopt, amend or terminate any
compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect
<PAGE>
upon Company, its business, assets or prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Company, nor will any repurchase of any
of Company's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall
use their best efforts to take, or cause to be taken, all actions necessary to
effect the reorganization contemplated hereby under applicable law. The Company
and Shareholders shall cause the amendment of the Articles of Incoporation of
the Company to change the purpose of the corporation from the practice of
dentistry to general corporate purposes and execute all necessary documentation
to evidence such amendment in order to effectuate the reorganization
contemplated hereby.
4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change
in any material respect the tax or financial accounting methods or practices
followed by Company (including any material change in any assumption underlying,
or any method of calculating, any bad debt, contingency or other reserve),
except as may be required by law or generally accepted accounting principles.
Company and Shareholders will duly, accurately and timely (without regard to any
extensions of time) file all returns, information statements and other documents
relating to taxes of Company required to be filed by it, and pay all taxes
required to be paid by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Company hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Company and Shareholders covenant and agree that all of the
creditors with respect to the Business and the Assets will be paid in full by
Company prior to the Closing Date, except to extent that any liability to such
creditors is assumed by Pentegra pursuant to this Agreement. If required by
Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment
of all creditors with respect to the Business and the Assets. Notwithstanding
the foregoing, Company and Shareholders may dispute the validity or amount of
any such creditor's claim without being deemed to be in violation of this
SECTION 4.11, provided that such dispute is in good faith and does not
unreasonably delay the resolution of the claim and provided, further that
Company and Shareholders agree to indemnify and bond Pentegra for such amounts
as is satisfactory to Pentegra.
4.12 LEASE. If Company leases any of its premises from any Shareholder or
other affiliate of Company or any shareholder of Company, Pentegra shall have
entered into a building lease (the "Building Lease") with the owner of such
premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, (i) a five year initial
term plus three five-year renewal options, (ii) a lease rate equal to the fair
market value lease rate, as agreed to by Pentegra, and (iii) such other
provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with
all requests made by Pentegra for the purpose of allowing Pentegra to hire those
non-dentist employees of Company designated by Pentegra, such employment to be
effective as of the Closing Date. Notwithstanding the above, Company and
Shareholders shall remain liable under any Company Plans for any claims incurred
by any employees or their spouses or dependents, and for all compensation,
bonuses, benefits and other such items and other liabilities related to
Company's employees incurred by Company prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all
employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be
treated as "leased employees" (as defined in Code Section 414(n)) of Company and
shall be treated as Clinic employees for purposes of eligibility and
participation in Company Plans.
<PAGE>
4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective
as of the Closing Date.
4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a
limited liability company, partnership or other legal entity (the "Practice")
approved by Pentegra for the purpose of practicing dentistry and entering
into the Service Agreement. The Practice shall be duly organized, in
existing and in good standing under the laws of the State in which the
practice of dentistry is conducted by the Shareholders and the Practice. The
Practice shall have all necessary power to own all of its assets and to carry
on its business as such business is now being conducted. The Shareholders
shall be the sole member/shareholder/partner of the Practice and own all such
interests free of all security interests, claims, encumbrances and liens.
Each interest in the Practice shall be legally and validly issued and fully
paid and nonassessable. There shall be no outstanding (a) bonds, debentures,
notes or other obligations the holders of which have the right to vote with
the members/partners/shareholders of the Practice on any matter, (b)
securities of the Practice convertible into equity interests in the Practice,
or (c) commitments, options, rights or warrants to issue any such equity
interests in the Practice, to issue securities of the Practice convertible
into such equity interests, or to redeem any securities of the Practice. No
interests of the Practice shall have been issued or disposed of in violation
of the preemptive rights, rights of first refusal or similar rights of any of
the Practice's members/partners/shareholders. The Practice shall quality to
do business as a foreign entity in any other state or jurisdiction by reason
of its business, properties or activities in or relating to such other state
or jurisdiction. The Company shall have transferred the Excluded Assets set
forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to
assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for
equity interest in the Practice, and the Company shall have distributed such
equity interests in the Practice to the Shareholders.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation,
Bylaws/Regulations and minutes of the Practice and all amendments thereto of
the Practice shall have been delivered to Pentegra and shall be in form and
substance satisfactory to Pentegra. The minute books of the Practice shall
contain all accurate minutes of the meetings of and consents to actions taken
without meetings of the members\managers/partners/board of directors of the
Practice since its formation. The books of account of the Practice shall
have been kept accurately in the ordinary course of business and the
revenues, expenses, assets and liabilities of the Practice shall have been
properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements
and other documents to be executed and delivered by it pursuant to this
Agreement, including without limitation, the Service Agreement and each
Employment Agreement or to be executed and delivered on the Closing Date, and
has taken all action required by law, its Organization/Partnership
Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to
authorize the execution, delivery and performance of such documents. The
Service Agreement, the Employment Agreement and the other agreements
contemplated hereby shall have been duly executed and delivered by the
Practice and constitute or will constitute the legal, valid and binding
obligations of the Practice enforceable against the Practice in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of the
Service Agreement, the Employment Agreements and the other agreements
contemplated hereby will not violate any provision of the organizational
documents of the Practice or any provisions of, or result in the acceleration
of, any obligation under any mortgage, lien, lease, agreement, rent,
instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any
material restrictions of any kind to which the Practice is subject, or result
in any lien or encumbrance on any of the Practice's assets.
<PAGE>
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and have filed with
the proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS.
Pentegra, Shareholders and Company agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall
cooperate to promptly prepare and file with the Securities Exchange
Commission ("SEC") the Registration Statement on Form S-1 (or other
appropriate Form) to be filed by Pentegra in connection with its Initial
Public Offering (including the prospectus constituting a part thereof, the
"Registration Statement"). Pentegra shall obtain all necessary state
securities laws or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement and the Company and Shareholders
shall furnish all information concerning Company and Shareholders as may be
reasonable requested in connection with any such action.
Company and Shareholder represent and warrant that none of the
information or documents supplied or to be supplied by it specifically for
inclusion in the Registration Statement, by exhibit or otherwise, will, at
the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act of 1933, 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, in
light of the circumstances under which they were made, not misleading.
Company and Shareholders shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.
Company and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by
Pentegra in connection with the preparation of the Registration Statement and
each amendment or supplement thereto, or any other statement, filing, notice
or application made by or on behalf of each such party or any of its
subsidiaries to any governmental entity in connection with the transactions
contemplated by the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
<PAGE>
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Company and Shareholders contained herein shall have been true and correct
in all respects when initially made and shall be true and correct in all
respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Company and Shareholders prior
to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Company shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Company, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service
Agreement"), in substantially the form attached hereto as EXHIBIT 7.7,
pursuant to which Pentegra will provide management services to the Practice.
Each Shareholder shall have executed and delivered a Guaranty Agreement in
substantially the form attached as EXHIBIT 4.10 of the Service Agreement
pursuant to which Shareholder shall, among other things, guaranty the
obligations of the Practice under the Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused
each shareholder of Company that has an existing employment agreement with
Company to have terminated his or her employment agreement with Company and
shall have executed an employment agreement ("Employment Agreement") with the
Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise
satisfactory to Company and Pentegra.
7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have
obtained all necessary government and other third-party approvals and
consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables
or payables between Company and its shareholders or affiliates and Company
shall not have any liabilities, including indebtedness, guaranties and
capital leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an
additional insured
<PAGE>
on their liability insurance program in accordance with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Company since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Company and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pentegra contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Company shall have received all documents, duly
executed in form satisfactory to Company and its counsel, referred to in
SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days
after requested by Pentegra, Company and Shareholders shall deliver to
Pentegra the following, all of which shall be in a form satisfactory to
counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel
for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or
letter agreement in form and substance mutually acceptable to the parties
hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by
<PAGE>
that agreement, including but not limited to the Guaranty Agreement and
security agreement referred to therein;
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of Company
authorizing the execution, delivery and performance of this Agreement, the
Service Agreement, the Employment Agreements and all related documents and
agreements each certified by the Secretary as being true and correct copies
of the original thereof;
(d) executed merger certificate and/or plan as required by
applicable state law;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra and the original stock certificates
together with blank stock powers representing the outstanding shares of
Company common stock;
(f) certificates of the Shareholders and a duly authorized officer
of Company dated as of the Closing Date, (i) as to the truth and correctness
of the representations and warranties of Company and Shareholder contained
herein; (ii) as to the performance of and compliance by Company and
Shareholder with all covenants contained herein; and (iii) certifying that
all conditions precedent of Company and Shareholders to the Closing have been
satisfied;
(g) a certificate of the Secretary of Company certifying as to the
incumbency of the directors and officers of Company and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Company;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Company and any state of required
foreign qualification of Company establishing that Company is in existence
and is in good standing to transact business in its state of incorporation;
(i) an opinion of counsel to Company and Shareholder opining as to
the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Company, the enforceability of this Agreement and the other agreements and
documents to be executed in connection herewith, and other matters reasonably
requested by Pentegra;
(j) non-foreign affidavits executed by Company;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Company and Shareholders, the following, all of which shall
be in a form satisfactory to counsel to Company and Shareholders and shall be
held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending
Closing, pursuant to an escrow agreement or letter agreement in form and
substance mutually acceptable to the parties hereto:
<PAGE>
(a) the Merger Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Company;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Company;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Company to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit attached hereto, any agreement executed pursuant hereto, and
any certificate executed and delivered by any party pursuant to the terms of
this Agreement, shall constitute representations and warranties of Company
and Shareholders, jointly and severally, or of Pentegra, as the case may be.
All such representations and warranties, and all representations and
warranties expressly labeled as such in this Agreement shall survive the date
of this Agreement and the Closing Date for a period of five (5) years
following the Closing Date, except that (i) the representations and
warranties with respect to environmental and medical waste laws and health
care laws and matters shall survive for a period of fifteen (15) years and
tax representations shall survive until one year after the expiration of the
applicable statute of limitations. Each party covenants with the other
parties not to make any claim with respect to such representations and
warranties, against any party after the date on which such survival period
shall terminate. No party shall be entitled to claim indemnity from any
other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has
timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the
case may be. Each party hereby releases, acquits and
<PAGE>
discharges the other party from any and all claims and demands, actions and
causes of action, damages, costs, expenses and rights of setoff with respect
to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable,
are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH
OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS
SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED
PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES,
ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED
TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM
OR BY REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR
TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION
10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND
SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS,
DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING,
INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT
APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST
ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS,
DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM OR WITH RESPECT TO:
<PAGE>
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR
AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL
LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION
ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS
RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER
THE CLOSING DATE,
(E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY
RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A
RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH
THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS
SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS
SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE
REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO
MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED
<PAGE>
PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the
defense of such action or proceeding, such Indemnified Person shall notify
Indemnitor thereof. If any such action or other proceeding shall be brought
against any Indemnified Person, Indemnitor shall, upon written notice given
within a reasonable time following receipt by Indemnitor of such notice from
Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Company or any Shareholder giving
rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra
shall be entitled to offset the amount of damages incurred by it as a result
of such breach of warranty, representation, covenant or agreement against any
amounts payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Company
or any Shareholder contained in this Agreement or in any certificate or other
document executed and delivered by Company or any Shareholder pursuant to
this Agreement is or becomes untrue or breached in any material respect or if
Company or any Shareholder fails to comply in any material respect with any
covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
(c) at any time by Company or any Shareholder if any representation or
warranty of Pentegra contained in this Agreement or in any certificate or
other document executed and delivered by Pentegra pursuant to this Agreement
is or becomes untrue or breached in any material respect or if Pentegra fails
to comply in any material respect with any covenant or agreement contained
herein and such misrepresentation, noncompliance or breach is not cured,
waived or eliminated within twenty (20) days after receipt of written notice
thereof;
(d) by Pentegra, Shareholders or Company if the transaction contemplated
hereby shall not have been consummated by December 31, 1997; or
<PAGE>
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Company, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares
of Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer
shall be treated as effective for any purpose or (b) engage in any
transaction, whether or not with respect to any shares of Pentegra Common
Stock or any interest therein, the intent or effect of which is to reduce the
risk of owning shares of Pentegra Common Stock. The certificates evidencing
the Pentegra Common Stock delivered to Company pursuant to the terms hereof
will bear a legend substantially in the form set forth below and containing
such other information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the
shares of Pentegra Common Stock to be delivered to Company pursuant to this
Agreement have not been and will not be registered under the Securities Act
of 1933 and may not be resold without compliance with the Securities Act of
1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to
this Agreement is being acquired solely for its own account, for investment
purposes only and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution. Each
Shareholder covenants, warrants and represents that none of the shares of
Pentegra Common Stock issued to it will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the Securities Act, as
amended, and the rules and regulations of the Securities Exchange Commission
and applicable state securities laws and regulations. All certificates
evidencing shares of Pentegra Common Stock shall bear the following legend in
addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock
shall bear any legend required by the securities or blue sky laws of any
state where Company resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the
economic risk of an investment in Pentegra Common Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and
have such knowledge and experience in financial and business matters that
they are capable of evaluating the merits and risks of the proposed
investment and therefore have the capacity to protect their own interests in
connection with the acquisition of the Pentegra Common Stock. Shareholders
<PAGE>
and their representatives have had an adequate opportunity to ask questions
and receive answers from the officers of Pentegra concerning any and all
matters relating to the background and experience of the officers and
directors of Pentegra, the plans for the operations of the business of
Pentegra, and any plans for additional acquisitions and the like.
Shareholders and their representatives have asked any and all questions in
the nature described in the preceding sentence and all questions have been
answered to their satisfaction. Shareholders are "accredited investors" as
defined in Regulation D of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Company and Shareholders agree that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally
through no fault of Company or Shareholders, (ii) disclosure is required by
law or the order of any governmental authority under color of law, provided,
that prior to disclosing any information pursuant to this clause (ii),
Company and Shareholders shall, if possible, give prior written notice
thereof to the other parties hereto, and provide such other parties hereto
with the opportunity to contest such disclosure, (iii) Company and
Shareholders reasonably believe that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party, or
(iv) Company and Shareholders are the sole and exclusive owner of such
confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Company or Shareholders of the provisions of this SECTION 13, Pentegra shall
be entitled to an injunction restraining Company and Shareholders from
disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Pentegra from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. The obligations of the parties under this SECTION 13 shall
survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement will qualify as a reorganization within the meaning of
Section 368(a) of the Code. The tax returns (and schedules thereto) of
Shareholders, Company and Pentegra shall be filed in a manner consistent
with such intention and Shareholders and Pentegra shall each provide the
other with such tax information, reports, returns or schedules as may be
reasonably required to assist the other in so reporting the transactions
contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
<PAGE>
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Company and Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Company or any Shareholder for services
rendered in connection with negotiating and closing the transactions
contemplated by this Agreement or the documents to be executed in connection
herewith, whether or not such costs or expenses are incurred before or after
the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Company.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all
<PAGE>
purposes and not only in connection with the specific representation in which
they are explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one and the
same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Company, be relieved from its obligations
to Company under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Company, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Company and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Company or may demand from Company, and Company agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Companys or Shareholders (hereinafter referred to as a "Party"), whether made
before or after the institution of any legal proceeding, any dispute among
the parties hereto in any way arising out of, related to, or in connection
with this Agreement (hereinafter a "Dispute"), shall be resolved by binding
arbitration in accordance with the terms of this Section (hereinafter the
"Arbitration Program").
<PAGE>
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or foreclosing upon any
personal property in which there has been granted a security interest or lien
by a Party in the Documents. In Disputes involving indebtedness or other
monetary obligations, each Party agrees that the other Party may proceed
against all liable persons, jointly and severally against one or more of
them, without impairing rights against other liable persons. Nor shall a
Party be required to join the principal obligor or any other liable persons
(e.g., sureties or guarantors) in any proceeding against a particular person.
A Party may release or settle with one or more liable persons as the Party
deems fit without releasing or impairing rights to proceed against any
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoeniz,
Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep
<PAGE>
all Disputes and arbitration proceedings strictly confidential, except for
disclosures of information required in the ordinary course of business of the
Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
HAROLD A. PEBBLES, D.D.S, P.C.
By: /s/ Harold A. Pebbles, D.D.S.
-----------------------------------------
Harold A. Pebbles, D.D.S., President
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
-----------------------------------------
Its: Senior Vice President
-----------------------------------------
/s/ Harold Pebbles, D.D.S.
--------------------------------------------
Harold Pebbles, D.D.S.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
Annex I Merger Consideration
A Target Companies
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
4.16 Excluded Assets and Excluded Liabilities
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
</TABLE>
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
AND
JIMMY F. PINNER, D.D.S.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . 3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . . 3
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . . 3
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . . 7
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . . 8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . . 8
3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4. COVENANTS OF DENTIST.
4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . 9
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . . 9
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . . 10
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 10
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . . 10
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . . 11
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . 11
Section 6. COVENANTS OF PENTEGRA AND DENTIST
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 12
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . . 12
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . 12
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8. DENTIST'S CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 13
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9. CLOSING DELIVERIES
<PAGE>
9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . . . . . . . 16
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . . 19
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.12 NO RULE OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.13 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.14 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.15 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.16 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.17 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as
of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware
corporation ("Pentegra") and Jimmy F. Pinner, D.D.S. ("Dentist").
WITNESSETH:
WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires
to receive from Dentist, certain assets of Dentist;
WHEREAS, Pentegra or its affiliated designee has entered into or intends to
enter into Agreements and Plans of Reorganization, Asset Contribution Agreements
and other acquisition agreements (collectively, the "Other Agreements") with
such persons or entities or the stockholders of such entities listed on EXHIBIT
A (together with Dentist, the "Target Companies");
WHEREAS, it is intended for Federal income tax purposes that the transfers
contemplated by this Agreement, the Other Agreements and Pentegra's initial
public offering ("Initial Public Offering") of shares of its common stock, par
value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange
within the meaning of Section 351 of the Internal Revenue Code of 1986, as
amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock
is consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions
contained herein, on the Closing Date, Dentist shall convey, transfer, deliver
and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all
of Dentist's right, title and interest in and to those certain assets described
on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively
"Assets"), free and clear of all obligations, security interests, claims, liens
and encumbrances, except as specifically assumed, or taken subject to, by
Pentegra pursuant to SECTION 1.3(b) hereof.
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and
<PAGE>
contributed hereunder, and Dentist shall retain all of its right, title and
interest in and to, the assets not specifically transferred hereunder,
including without limitation, the assets described on EXHIBIT 1.2 (the
"Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Dentist contained
herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Dentist the consideration specified in
ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b)
attached hereto to the extent that such obligations, commitments, liabilities
and indebtedness are current and not otherwise in default. (the "Assumed
Liabilities"). Notwithstanding any contrary provision contained herein,
Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i)
any liability, commitment or obligation or trade payable or indebtedness not
specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on
EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default
under such contracts, leases, commitments or obligations which occurred on or
before the Closing Date; (iii) any liability for any employee benefits
payable to employees of Dentist, including, but not limited to, liabilities
arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any
liability based upon or arising out of a violation of any antitrust or
similar restraint-of-trade laws by Dentist, including, without limiting the
generality of the foregoing, any such antitrust liability which may arise in
connection with agreements, contracts, commitments or orders for the sale of
goods or provision of services by Dentist reflected on the books of Dentist
at or prior to the Closing Date; (v) any liability based upon or arising out
of any tortious or wrongful actions of Dentist, any licensed professional
employee or independent contractor of Dentist, (vi) any liability for the
payment of any taxes of Dentist, including without limitation, sales, use and
other transfer taxes and income taxes arising from or by reason of the
transactions contemplated by this Agreement; (vii) any indebtedness secured
by deeds of trust or mortgages on real property; nor (viii) any liability
incurred or to be incurred pursuant to any malpractice or other suits or
actions pending against Dentist.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement, the
Dentist shall execute and deliver all such deeds, bills of sale, assignments and
assurances and take and do all such other actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right, title and interest
in, to and under the Assets in Pentegra or otherwise to carry out this
Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
Dentist hereby represents and warrants to Pentegra as follows:
2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the
State of Texas. Dentist does not have any assets, employees or offices in any
state other than the state set forth in the first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and
perform this
<PAGE>
Agreement and the other agreements to be executed and delivered in
connection herewith. This Agreement and all agreements and documents executed
and delivered in connection herewith have been, or will be as of the Closing
Date, duly executed and delivered by Dentist and constitute or will constitute
the legal, valid and binding obligations of Dentist in accordance with their
respective terms, except as may be limited by applicable bankruptcy, insolvency
or similar laws affecting creditors' rights generally or the availability of
equitable remedies. The execution and delivery of this Agreement, and the
agreements executed and delivered pursuant to this Agreement or to be executed
and delivered on the Closing Date, do not, and, subject to the receipt of
consents described on EXHIBIT 2.4, the consummation of the actions contemplated
hereby will not, result in the acceleration of, any obligation under any
mortgage, lien, lease, agreement, rent, instrument, order, arbitration award,
judgment or decree to which Dentist is a party or by which Dentist is bound, or
violate any material restrictions of any kind to which Dentist is subject, or
result in any lien or encumbrance on any of Dentist's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All material
building or other permits, certificates of occupancy, concessions, grants,
franchises, licenses, certificates of need and other governmental authorizations
and approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect and
are described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Dentist, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses or
permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Dentist.
2.5 [INTENTIONALLY DELETED].
2.6 [INTENTIONALLY DELETED].
2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any related
unaudited statements of income, retained earnings, schedule of accounts
receivable, accounts payable and accrued liabilities, and cash flows for the
twelve months then ended (collectively, with the related notes thereto, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and results of operations of Dentist as of the dates and for the
periods indicated and reflect all fixed and contingent liabilities of Dentist.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Dentist leases, as lessor or lessee, real or personal property
used in operating the Business, related to the Assets or otherwise. All such
leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their
respective terms, and there is not under any such lease any existing default by
Dentist, as lessor or lessee, or any condition or event of which Dentist has
knowledge which with notice or lapse of time, or both, would constitute a
default, in respect of which Dentist has not taken adequate steps to cure such
default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Dentist has no knowledge of any
latent defects therein.
<PAGE>
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances set
forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to the Closing Date and evidence of
such releases of liens and claims shall be provided to Pentegra on the Closing
Date and the Assets shall not be used to satisfy such liens, claims or
encumbrances. Pentegra acknowledges that it has acquired the assets "where and
as is" relying solely upon Pentegra's own examination.
2.11 INVENTORIES. All of the Assets constituting inventory are owned or
used by Dentist, are in good, current, standard and merchantable condition and
are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Dentist has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Dentist, including the names of any entities from whom Dentist previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Dentist in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Dentist has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on
EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this
Agreement of: (a) the most recent payroll report of Dentist, showing all current
employees of Dentist and their current levels of compensation, (b) promised
increases in compensation of employees of Dentist that have not yet been
effected, (c) oral or written employment agreements, consulting agreements or
independent contractor agreements (and all amendments thereto) to which Dentist
is a party, copies of which have been delivered to Pentegra, and (d) all
employee manuals, materials, policies, procedures and work-related rules, copies
of which have been delivered to Pentegra. Dentist is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Dentist has not engaged in any unfair labor practice.
There are no unfair labor practices charges or complaints pending or threatened
against Dentist, and Dentist has never been a party to any agreement with any
union, labor organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Except as set forth on Exhibit 2.16, neither
Dentist nor the Business nor any of the Assets is subject to any pending, nor
does Dentist have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Dentist, the Business, the Assets or the transactions contemplated by
this Agreement, and, to the knowledge of Dentist, no basis for any such action
exists, nor is there any legal impediment of which Dentist has knowledge to the
continued operation of its business or the use of the Assets in the ordinary
course, subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts, obligations
and commitments of Dentist ("Contracts"), entered into
<PAGE>
in connection with and related to the Assets or the Business, all of which
are listed or incorporated by reference on EXHIBIT 2.8 (in the case of
leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15
(in the case of Contracts other than leases) attached hereto. Except as
otherwise indicated on such Exhibits, all of such Contracts are valid,
binding and enforceable in accordance with their terms and are in full force
and effect, and no defenses, offsets or counterclaims have been asserted or
may be made by any party thereto. Except as indicated on such Exhibits,
there is not under any such Contract any existing default by Dentist, or any
condition or event of which Dentist has knowledge which with notice or lapse
of time, or both, would constitute a default. Dentist has no knowledge of
any default by any other party to such Contracts. Dentist has not received
notice of the intention of any party to any Contract to cancel or terminate
any Contract and have no reason to believe that any amendment or change to
any Contract is contemplated by any party thereto. Other than those
contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13
and EXHIBIT 2.15, Dentist is not a party to any material written or oral
agreement contract, lease or arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product or
service;
(h) Loan agreement or other contract for money borrowed or lent or to
be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of the
Dentist, oral or written, that provide for prepayments or deferred installment
payments; or
(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Dentist on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) or entered into any contract, lease, license or
commitment, except in connection with the performance of this Agreement, other
than in the course of business;
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material
<PAGE>
obligation or liability (absolute, accrued, contingent or otherwise) other
than (i) liabilities shown or reflected on the Balance Sheet, (ii)
liabilities incurred since the Balance Sheet Date in the ordinary course of
business;
(c) Made any payments to or loaned any money to any person or entity
other than in the ordinary course of business;
(d) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(e) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have been
required due to income or operations of Dentist since the Balance Sheet Date;
(f) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(g) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(h) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants or
agents, or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of any officer, employee, consultant or agent;
(i) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00);
(j) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(k) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties, assets
or business or the Business or the Assets, or experienced any other material
adverse change in its financial condition, assets, prospects, liabilities or
business; or
(l) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports
and other statements) required to have been filed by it or have been properly
extended, and has paid all taxes (including any interest, penalty or additions
thereto) required to have been paid by it. All such tax returns are complete
and accurate in all respects and properly reflect the relevant taxes for the
periods covered thereby. Dentist has not received any notice that any tax
deficiency or delinquency has been or may be asserted against Dentist. There
are no audits relating to taxes of Dentist pending or in process or, to the
knowledge of Dentist, threatened. Dentist is not currently the beneficiary of
any waiver of any statute of limitations in respect of taxes nor of any
extension of time within which to file any tax return or to pay any tax
assessment or deficiency. There are no liens or encumbrances relating to taxes
on or threatened against any of the assets of Dentist. Dentist has withheld and
paid all taxes required by law to have been withheld and paid by it. Neither
Dentist nor any predecessor of Dentist is or has been a party to any tax
allocation or
<PAGE>
sharing agreement or a member of an affiliated group of corporations filing a
consolidated Federal income tax return. Dentist has delivered to Pentegra
correct and complete copies of Dentist's three most recently filed annual
state, local and Federal income tax returns, together with all examination
reports and statements of deficiencies assessed against or agreed to by
Dentist during the three calendar year period preceding the date of this
Agreement. Dentist has neither made any payments, is obligated to make any
payments, or is a party to any agreement that under any circumstance could
obligate it to make any payments that will not be deductible under Code
section 280G.
(b) Dentist does not intend to dispose of any of the shares of Pentegra
Common Stock to be received hereunder and is not a party to any plan,
arrangement or agreement for the disposition of such shares. Nothing contained
herein shall prohibit Dentist from selling such shares of Pentegra Common Stock
after the designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated by
this Agreement which may be now or hereafter asserted against Pentegra, Dentist
resulting from any action taken by Dentist or their respective agents or
employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against
on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and
has not incurred since that date and will not have incurred as of the Closing
Date, any material liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, other than
those incurred in the ordinary course of business or as set forth on EXHIBIT
2.16. Dentist does not know, or have reasonable grounds to know, of any basis
for the assertion against Dentist as of the Balance Sheet Date, of any claim or
liability of any nature in any amount not fully reflected or reserved against on
the Balance Sheet, or of any claim or liability of any nature arising since that
date other than those incurred in the ordinary course of business or
contemplated by this Agreement. All indebtedness of Dentist (including without
limitation, indebtedness for borrowed money, guaranties and capital lease
obligations) is described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist
carries property, liability, malpractice, workers' compensation and such other
types of insurance as is customary in the industry. Valid and enforceable
policies in such amounts are outstanding and duly in force and will remain duly
in force through the Closing Date. All such policies are described in EXHIBIT
2.20 attached hereto and true and correct copies have been delivered to
Pentegra. Dentist has not received notice or other communication from the
issuer of any such insurance policy cancelling or amending such policy or
threatening to do so. Neither Dentist nor any licensed professional employee of
Dentist has any outstanding claims, settlements or premiums owed against any
insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached
hereto, Dentist has neither established, nor maintains, nor is obligated to make
contributions to or under or otherwise participate in, (a) any bonus or other
type of compensation or employment plan, program, agreement, policy, commitment,
contract or arrangement (whether or not set forth in a written document); (b)
any pension, profit-sharing, retirement or other plan, program or arrangement;
or (c) any other employee benefit plan, fund or program, including, but not
limited to, those described in SECTION 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT
2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been
operated and administered in all material respects in accordance with all
applicable laws, rules and regulations, including without limitation, ERISA, the
Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of
1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination
in Employment Act of 1967, as amended, and the related rules and regulations
adopted by those Federal agencies responsible for the administration of such
laws. To the best of the Dentist's knowledge, no act or failure to
<PAGE>
act by Dentist has resulted in a "prohibited transaction" (as defined in
ERISA) with respect to the Dentist Plans. No "reportable event" (as defined
in ERISA) has occurred with respect to any of the Dentist Plans. Dentist has
not previously made, is not currently making, and is not obligated in any way
to make, any contributions to any multiemployer plan within the meaning of
the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each
Dentist Plan, either (i) the value of plan assets (including commitments
under insurance contracts) is at least equal to the value of plan liabilities
or (ii) the value of plan liabilities in excess of plan assets is disclosed
on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing
Date, a party to any agreement or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree, rule or
regulation that materially and adversely affects the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Dentist,
the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed
professional employees, and the conduct of the Business and use of the Assets,
have complied with all applicable laws, rules, regulations and licensing
requirements, including, without limitation, the Federal Environmental
Protection Act, the Occupational Safety and Health Act, the Americans with
Disabilities Act and any environmental laws and medical waste laws, and there
exist no violations by Dentist or any licensed professional employee of Dentist
of any Federal, state or local law or regulation. Dentist has not received any
notice of a violation of any Federal, state and local laws, regulations and
ordinances relating to the operations of the Business and Assets and no notice
of any pending inspection or violation of any such law, regulation or ordinance
has been received by Dentist.
2.24 THIRD PARTY PAYORS. Dentist and each licensed professional
employee or independent contractor of Dentist has timely filed all claims or
other reports required to be filed with respect to the purchase of services
by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are
no pending appeals, overpayment determinations, adjustments, challenges,
audit, litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Dentist and each
licensed professional employee of Dentist. Neither Dentist nor any licensed
professional employee of Dentist has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Dentist and Dentist's licensed professional employees have not (a) knowingly
and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist
in this Agreement, and no Exhibit or certificate issued or executed by, or
information furnished by Dentist or to be furnished by Dentist to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Dentist has with any bank or other
financial institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
<PAGE>
deposit box, etc.) and the person or persons authorized in respect thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or
employee (or their respective spouses, children or affiliates) owns directly or
indirectly, on an individual or joint basis, any interest in, has a compensation
or other financial arrangement with, or serves as an officer or director of, any
customer or supplier or competitor of Dentist or any organization that has a
material contract or arrangement with Dentist.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of
the names and addresses of each payor of Dentist's services which accounted for
more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has
good relations with all such payors and other material payors of Dentist and
none of such payors has notified Dentist that it intends to discontinue its
relationship with Dentist or to deny any claims submitted to such payor for
payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Dentist as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions required
by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize
the execution, delivery and performance of this Agreement and such related
documents. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing Date,
duly executed and delivered by Pentegra and constitute or will constitute the
legal, valid and binding obligations of Pentegra, enforceable against Pentegra
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and delivery
of this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and, the
consummation of the actions contemplated hereby will not, violate any provision
of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or decree
to which Pentegra is a party or by which Pentegra is bound, or violate any
material restrictions of any kind to which Pentegra is subject, or result in any
lien or encumbrance on any of Pentegra's assets. Other than as have been
obtained or as would not have a material adverse effect, there are no consents
of any person or entity required for the transaction contemplated hereby on
behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Pentegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would not
have a material adverse effect, there are no proceedings pending or, to the
knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses or
permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any pending,
nor does Pentegra have knowledge of any threatened,
<PAGE>
litigation, governmental investigation, condemnation or other proceeding
against or relating to or affecting Pentegra, its business, assets or the
transactions contemplated by this Agreement, and, to the knowledge of
Pentegra, no basis for any such action exists, nor is there any legal
impediment of which Pentegra has knowledge to the continued operation of its
business or the use of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports and
other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it, other than as would not have a material adverse effect. Pentegra
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Pentegra. There are no audits relating to taxes of
Pentegra pending or in process or, to the knowledge of Pentegra, threatened.
Pentegra is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra
in this Agreement, and no Exhibit or certificate issued by officers or directors
of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements or facts contained therein not
misleading.
SECTION 4. COVENANTS OF DENTIST.
Dentist agrees that between the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and conditions. Dentist agrees to complete the
Exhibits hereto to be provided by him in form and substance satisfactory to both
Dentist and Pentegra.
4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the
Assets in the ordinary course. Dentist shall not enter into any lease,
contract, indebtedness, commitment, purchase or sale or acquire or dispose of
any capital asset relating to the Business or the Assets except in the ordinary
course of business. Dentist shall use their best efforts to preserve the
Business and Assets intact and shall not take any action that would have an
adverse effect on the Business or Assets. Dentist shall use their best efforts
to preserve intact the relationships with payors, customers, suppliers, patients
and others having significant business relations with Dentist. Dentist shall
collect its receivables and pay its trade payables in the ordinary course of
business. Dentist shall not introduce any new method of management, operations
or accounting.
4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized
representatives access to, and make available for inspection, all of the assets
and business of Dentist, the Business and the Assets, including employees,
customers and suppliers and permit Pentegra and its authorized representatives
to
<PAGE>
inspect and make copies of all documents, records and information with
respect to the business or assets of Dentist, the Business or the Assets as
Pentegra or its representatives may request. Dentist shall promptly notify
Pentegra in writing of (a) any notice or communication relating to a default or
event that, with notice or lapse of time or both, could become a default, under
any contract, commitment or obligation to which Dentist is a party or relating
to the Business or the Assets, and (b) any adverse change in Dentist's or the
Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall
use his best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby, including
consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain
all licenses, permits, approvals or other authorizations required under any law,
rule, regulation, or otherwise to provide the services of the Practice
contemplated by the Service Agreement and to conduct the intended business of
the Practice and operate the Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of Closing or the termination of this Agreement in accordance with the
provisions hereof, Dentist shall not, and shall use its best efforts to cause
Dentist's employees, agents and representatives not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making or implementation
of any proposal or offer, including without limitation, any proposal or offer to
the Dentist, with respect to a merger, acquisition, consolidation or similar
transaction involving, or the purchase of all or any significant portion of the
assets or any equity securities of Dentist or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to such proposal or offer, and Dentist
will immediately cease any such activities, discussions or negotiations
heretofore conducted with respect to any of the foregoing. Dentist shall
immediately notify Pentegra if any such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund completely
for any accrued benefits, where applicable, or vested accrued benefits for which
Dentist or any entity might have any liability whatsoever arising from any
insurance, pension plan, employment tax or similar liability of Dentist to any
employee or other person or entity (including, without limitation, any Dentist
Plan and any liability under employment contracts with Dentist) allocable to
services performed prior to the Closing Date. Dentist acknowledges that the
purpose and intent of this covenant is to assure that Pentegra shall have no
liability whatsoever at any time after the Closing Date with respect to any of
Dentist's employees or similar persons or entities, including, without
limitation, any Dentist Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of the Dentist (other than in the ordinary course of business) or other employee
or an independent contractor of Dentist, adopt, amend or terminate any
compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect upon Dentist, its business, assets or
prospects.
4.8 [INTENTIONALLY OMITTED].
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best
efforts to take, or cause to be taken, all actions necessary to effect the
acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material
respect the tax or financial accounting methods or practices followed by Dentist
(including any material change in any
<PAGE>
assumption underlying, or any method of calculating, any bad debt,
contingency or other reserve), except as may be required by law or generally
accepted accounting principles. Dentist will duly, accurately and timely
(without regard to any extensions of time) file all returns, information
statements and other documents relating to taxes of Dentist required to be
filed by it, and pay all taxes required to be paid by it, on or before the
Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive
any compliance with the applicable state Bulk Transfers Act, if any. Dentist
covenants and agrees that all of the creditors with respect to the Business and
the Assets will be paid in full by Dentist prior to the Closing Date, except to
extent that any liability to such creditors is assumed by Pentegra pursuant to
this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with
proof of payment of all creditors with respect to the Business and the Assets.
Notwithstanding the foregoing, Dentist may dispute the validity or amount of any
such creditor's claim without being deemed to be in violation of this SECTION
4.11, provided that such dispute is in good faith and does not unreasonably
delay the resolution of the claim and provided, further that Dentist agrees to
indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Dentist leases any of its premises from the Dentist or
other affiliate of Dentist, Pentegra shall have entered into a building lease
(the "Building Lease") with the owner of such premises on terms and conditions
satisfactory to Pentegra, the terms and conditions of which shall include,
without limitation, (i) a five year initial term plus three five-year renewal
options, (ii) a lease rate equal to the fair market value lease rate, as agreed
to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made
by Pentegra for the purpose of allowing Pentegra to hire those non-dental
employees of Dentist employed by the Dentist as of the Closing Date with such
employment to be effective as of the Closing Date. Notwithstanding the above,
Dentist shall remain liable under any Dentist Plans for any claims incurred by
any employees or their spouses or dependents, and for all compensation, bonuses,
benefits and other such items and other liabilities related to Dentist's
employees incurred by Dentist prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all
employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be
treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and
shall be treated as Clinic employees for purposes of eligibility and
participation in Dentist Plans.
4.15 INSURANCE. Dentist shall agree to have and shall assist Pentegra and
its affiliates to be named as an additional insured on its liability insurance
programs, effective as of the Closing Date.
4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited
liability company, partnership or other legal entity (the "Practice") for the
purpose of practicing dentistry and entering into the Service Agreement. The
Practice shall be duly organized, in existing and in good standing under the
laws of the State in which the Dentist and the Practice are to practice
dentistry. The Practice shall have all necessary power to own all of its assets
and to carry on its business as such business is now being conducted. The
Dentist shall be the sole member/shareholder/partner of the Practice and own all
such interests free of all security interests, claims, encumbrances and liens.
Each interest in the Practice shall be legally and validly issued and fully paid
and nonassessable. There shall be no outstanding (a) bonds, debentures, notes
or other obligations the holders of which have the right to vote with the
members/partners/shareholders of the Practice on any matter, (b) securities of
the Practice convertible into equity interests in the Practice, or (c)
commitments, options, rights or warrants to issue any such equity interests in
the Practice, to issue securities of the Practice convertible into such equity
interests, or to redeem any securities of the Practice. No interests
<PAGE>
of the Practice shall have been issued or disposed of in violation of the
preemptive rights, rights of first refusal or similar rights of any of the
Practice's members/partners/shareholders. The Practice shall qualify to do
business as a foreign entity in any other state or jurisdiction by reason of
its business, properties or activities in or relating to such other state or
jurisdiction.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations
and minutes of the Practice and all amendments thereto of the Practice shall
have been delivered to Pentegra. The minute books of the Practice shall contain
all accurate minutes of the meetings of and consents to actions taken without
meetings of the members\managers/partners/board of directors of the Practice
since its formation. The books of account of the Practice shall have been kept
accurately in the ordinary course of business and the revenues, expenses, assets
and liabilities of the Practice shall have been properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements and
other documents to be executed and delivered by it pursuant to this Agreement,
including without limitation, the Service Agreement and each Employment
Agreement to be executed and delivered on the Closing Date, and has taken all
action required by law, its Organization/Partnership Agreement/Articles of
Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution,
delivery and performance of such documents. The Service Agreement, the
Employment Agreement and the other agreements contemplated hereby shall have
been duly executed and delivered by the Practice on the Closing Date and
constitute or will constitute the legal, valid and binding obligations of the
Practice enforceable against the Practice in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of the Service Agreement, the Employment
Agreements and the other agreements contemplated hereby will not violate any
provision of the organizational documents of the Practice or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or decree
to which the Practice is a party or by which the Practice is bound, or violate
any material restrictions of any kind to which the Practice is subject, or
result in any lien or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and has filed with the
proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra and Dentist agree to
complete the Exhibits hereto to be provided by both parties.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
<PAGE>
SECTION 6. COVENANTS OF PENTEGRA AND DENTIST.
Pentegra and Dentist agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to
promptly prepare and file with the Securities Exchange Commission ("SEC")
the Registration Statement on Form S-1 (or other appropriate Form) to be
filed by Pentegra in connection with its Initial Public Offering (including
the prospectus constituting a part thereof, the "Registration Statement").
Pentegra shall obtain all necessary state securities laws or "Blue Sky"
permits and approvals required to carry out the transactions contemplated by
this Agreement and the Dentist shall furnish all information concerning
Dentist as may be reasonable requested in connection with any such action.
Dentist represents and warrants that none of the information or documents
supplied or to be supplied by it specifically for inclusion in the
Registration Statement, by exhibit or otherwise, will, at the time the
Registration Statement and each amendment or supplement thereto, if any,
becomes effective under the Securities Act of 1933, 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, in light of
the circumstances under which they were made, not misleading. Dentist shall
be entitled to review the Registration Statement and each amendment thereto,
if any, prior to the time each becomes effective under the Securities Act of
1933.
Dentist shall furnish Pentegra will all information concerning itself and
such other matters as may be reasonable requested by Pentegra in connection
with the preparation of the Registration Statement and each amendment or
supplement thereto, or any other statement, filing, notice or application
made by or on behalf of each such party or any of its subsidiaries to any
governmental entity in connection with the transactions contemplated by the
Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Dentist contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied
with all covenants and conditions required by this Agreement to be performed
and complied with by Dentist prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Dentist shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Dentist, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
<PAGE>
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a mutually agreeable Service Agreement (the
"Service Agreement"), which may be in the form attached hereto as EXHIBIT
7.7, and otherwise satisfactory to Dentist and Pentegra, pursuant to which
Pentegra will provide management services to the Practice. Dentist shall have
executed and delivered a mutually agreeable Guaranty Agreement which may be
in the form attached as EXHIBIT 4.10, and otherwise satisfactory to Dentist
and Pentegra, of the Service Agreement pursuant to which Dentist shall, among
other things, guaranty the obligations of the Practice under the Service
Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her
employment agreement and executed a mutually agreeable employment agreement
("Employment Agreement") with the Practice which may be in the form attached
hereto as EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra.
7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary
government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables
or payables between Dentist and its affiliates and Dentist shall not have any
liabilities, including indebtedness, guaranties and capital leases, that are
not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Dentist shall have named Pentegra as an additional
insured on its liability insurance program in accordance with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Dentist since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. DENTIST'S CONDITIONS PRECEDENT.
The obligations of Dentist hereunder are subject to fulfillment at or
prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pentegra contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants
<PAGE>
and conditions required by this Agreement to be performed and complied with
by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly
executed in form satisfactory to Dentist and its counsel, referred to in
SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF DENTIST. On or before the Closing Date, Dentist shall
deliver to Pentegra the following, all of which shall be in a form
satisfactory to counsel to Pentegra and shall be held by Jackson & Walker,
L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an
escrow agreement or letter agreement in form and substance mutually
acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a bill of sale conveying the Assets to Pentegra;
(d) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(e) certificates of Dentist dated as of the Closing Date, (i) as to
the truth and correctness of the representations and warranties of Dentist
contained herein; (ii) as to the performance of and compliance by Dentist
with all covenants contained herein; and (iii) certifying that all conditions
precedent of Dentist to the Closing have been satisfied;
(f) an opinion of counsel to Dentist opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Dentist, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Pentegra;
(g) non-foreign affidavits executed by Dentist;
(h) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
<PAGE>
(i) an executed Registration Rights Agreement between Pentegra and
Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(j) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Dentist the following, all of which shall be in a form
satisfactory to counsel to Dentist and shall be held by Jackson & Walker,
L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an
escrow agreement or letter agreement in form and substance mutually
acceptable to the parties hereto:
(a) the Acquisition Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Dentist;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Dentist;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Dentist to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this
Agreement or in any Exhibit attached hereto, any agreement executed pursuant
hereto, and any certificate executed and delivered by any party
<PAGE>
pursuant to the terms of this Agreement, shall constitute representations and
warranties of Dentist or of Pentegra, as the case may be. All such
representations and warranties, and all representations and warranties
expressly labeled as such in this Agreement shall survive the date of this
Agreement and the Closing Date for a period of five (5) years following the
Closing Date, except that (i) the representations and warranties with respect
to environmental and medical waste laws and health care laws and matters
shall survive for a period of fifteen (15) years and tax representations
shall survive until one year after the expiration of the applicable statute
of limitations. Each party covenants with the other parties not to make any
claim with respect to such representations and warranties, against any party
after the date on which such survival period shall terminate. No party shall
be entitled to claim indemnity from any other party pursuant to SECTION 10.2
or 10.3 hereof, unless such party has timely given the notice required in
SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby
releases, acquits and discharges the other party from any and all claims and
demands, actions and causes of action, damages, costs, expenses and rights of
setoff with respect to which the notices required by SECTION 10.2, 10.3 or
10.4, as applicable, are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS
SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"),
SHALL INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE
EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND
AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS,
DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
(D) ANY LIABILITY OF PENTEGRA FOR COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION,
PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR
THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO
<PAGE>
THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED
PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION
10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS,
SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND
EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR
WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR
AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING
HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF
OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY
THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR
AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION,
PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR
THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED
TO PENTEGRA OR ITS COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY
<PAGE>
PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING
A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT
OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL
FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE
THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after
Indemnified Person receives written notice of the commencement of any action
or other proceeding in respect of which indemnification or reimbursement may
be sought hereunder, or within such lesser time as may be provided by law for
the defense of such action or proceeding, such Indemnified Person shall
notify Indemnitor thereof. If any such action or other proceeding shall be
brought against any Indemnified Person, Indemnitor shall, upon written notice
given within a reasonable time following receipt by Indemnitor of such notice
from Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Dentist giving rise to
indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be
entitled to offset the amount of damages incurred by it as a result of such
breach of warranty, representation, covenant or agreement against any amounts
payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Dentist
contained in this Agreement or in any certificate or other document executed
and delivered by Dentist pursuant to this Agreement is or becomes untrue or
breached in any material respect or if Dentist fails to comply in any
material respect with any covenant or agreement contained herein, and any
such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
<PAGE>
(c) at any time by Dentist if any representation or warranty of Pentegra
contained in this Agreement or in any certificate or other document executed
and delivered by Pentegra pursuant to this Agreement is or becomes untrue or
breached in any material respect or if Pentegra fails to comply in any
material respect with any covenant or agreement contained herein and such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra or Dentist if the transaction contemplated hereby shall
not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Dentist, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the
Closing Date, Dentist shall not voluntarily (a) sell, assign, exchange,
transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i)
any shares of Pentegra Common Stock received as consideration by such party
hereunder, (ii) any interest (including without limitation, an option to buy
or sell) in any shares of Pentegra Common Stock, received by any party
hereunder as consideration, in whole or in part, and no such attempted
transfer shall be treated as effective for any purpose or (b) engage in any
transaction, whether or not with respect to any shares of Pentegra Common
Stock or any interest therein, received by any party hereunder as
consideration, the intent or effect of which is to reduce the risk of owning
shares of Pentegra Common Stock. The certificates evidencing the Pentegra
Common Stock delivered to Dentist pursuant to the terms hereof will bear a
legend substantially in the form set forth below and containing such other
information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the
shares of Pentegra Common Stock to be delivered to Dentist pursuant to this
Agreement have not been and will not be registered under the Securities Act of
1933 and may not be resold without compliance with the Securities Act of 1933.
The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement
is being acquired solely for its own account, for investment purposes only and
with no present intention of distributing, selling or otherwise disposing of it
in connection with a distribution. Dentist covenants, warrants and represents
that none of the shares of Pentegra Common Stock issued to it will be offered,
sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
except after full compliance with all of the applicable provisions of the
Securities Act, as amended, and the rules and regulations of the Securities
Exchange Commission and applicable state securities laws and regulations. All
certificates evidencing shares of Pentegra Common Stock shall bear the following
legend in addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and
<PAGE>
applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Dentist resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the
economic risk of an investment in Pentegra Common Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and
has such knowledge and experience in financial and business matters that they
are capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect its own interests in connection with
the acquisition of the Pentegra Common Stock. Dentist and its
representatives have had an adequate opportunity to ask questions and receive
answers from the officers of Pentegra concerning any and all matters relating
to the background and experience of the officers and directors of Pentegra,
the plans for the operations of the business of Pentegra, and any plans for
additional acquisitions and the like. Dentist and its representatives have
asked any and all questions in the nature described in the preceding sentence
and all questions have been answered to their satisfaction. Dentist is an
"accredited investor" as defined in Regulation D of the Securities Act of
1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes
and acknowledges that it had in the past, currently have, and in the future
may possibly have, access to certain confidential information of Pentegra
that is a valuable, special and unique asset of Pentegra's businesses.
Dentist agrees that it will not disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or
reason whatsoever, unless (i) such information becomes available to or known
by the public generally through no fault of Dentist, (ii) disclosure is
required by law or the order of any governmental authority under color of
law, provided, that prior to disclosing any information pursuant to this
clause (ii), Dentist shall, if possible, give prior written notice thereof to
the other parties hereto, and provide such other parties hereto with the
opportunity to contest such disclosure, (iii) Dentist reasonably believes
that such disclosure is required in connection with the defense of a lawsuit
against the disclosing party, or (iv) Dentist is the sole and exclusive owner
of such confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Dentist of the provisions of this SECTION 13, Pentegra shall be entitled to
an injunction restraining Dentist from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
Pentegra from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages. The obligations of the
parties under this SECTION 13 shall survive the termination of this Agreement.
Pentegra recognizes and acknowledges that it had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Dentist that is a valuable, special and unique asset of
Dentist. Pentegra agrees that it will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, unless (i) such information becomes
available to or known by the public generally through no fault of Pentegra,
(ii) disclosure is required by law or the order of any governmental authority
under color of law, provided, that prior to disclosing any information
pursuant to this clause (ii), Pentegra shall, if possible, give prior written
notice thereof to the other parties hereto, and provide such other parties
hereto with the opportunity to contest such disclosure, (iii) Pentegra
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party, or (iv) Pentegra is the
sole and exclusive owner of such confidential information as a result of the
transaction contemplated hereunder or otherwise. In the event of a breach or
threatened breach by Pentegra of the provision of this SECTION 13. Dentist
shall be entitled to an injunction restraining Pentegra from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting Pentegra from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages. The
obligations of the parties under this SECTION 13 shall survive the
termination of this Agreement.
<PAGE>
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions
contemplated by this Agreement, together with the transactions contemplated
by the Other Agreement and the Initial Public Offering, will qualify as an
exchange meeting the requirements of Section 351 of the Code. The tax
returns (and schedules thereto) of Dentist and Pentegra shall be filed in a
manner consistent with such intention and Dentist and Pentegra shall each
provide the other with such tax information, reports, returns or schedules as
may be reasonably required to assist the other in so reporting the
transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Dentist:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any
further acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of
the parties to this Agreement shall pay all of the costs and expenses
incurred by such party in connection with the transactions contemplated by
this Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses
<PAGE>
of legal counsel, accountants, auditors or other persons or entities retained
by Dentist for services rendered in connection with negotiating and closing
the transactions contemplated by this Agreement or the documents to be
executed in connection herewith, whether or not such costs or expenses are
incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and
its terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Dentist.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF
TEXAS AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made
for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this
Agreement are integral parts of this Agreement as if fully set forth herein,
and all statements appearing therein shall be deemed disclosed for all
purposes and not only in connection with the specific representation in which
they are explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS AND THE ESCROW LETTER ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT
OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS
BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one and the
same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Dentist, be relieved from its obligations
to Dentist under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Dentist, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable
<PAGE>
costs, including reasonable attorneys' fees, from the other party as part of
any judgment in such suit. The term "prevailing party" shall mean the party
in whose favor final judgment after appeal (if any) is rendered with respect
to the claims asserted in the Complaint. "Reasonable attorneys' fees" are
those reasonable attorneys' fees actually incurred in obtaining a judgment in
favor of the prevailing party.
14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Dentist (hereinafter referred to as a "Party"), whether made before or after
the institution of any legal proceeding, any dispute among the parties hereto
in any way arising out of, related to, or in connection with this Agreement
(hereinafter a "Dispute"), shall be resolved by binding arbitration in
accordance with the terms of this Section (hereinafter the "Arbitration
Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or foreclosing upon any
personal property in which there has been granted a security interest or lien
by a Party in the Documents. In Disputes involving indebtedness or other
monetary obligations, each Party agrees that the other Party may proceed
against all liable persons, jointly and severally against one or more of
them, without impairing rights against other liable persons. Nor shall a
Party be required to join the principal obligor or any other liable persons
(e.g., sureties or guarantors) in any proceeding against a particular person.
A Party may release or settle with one or more liable persons as the Party
deems fit without releasing or impairing rights to proceed against any
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
<PAGE>
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoenix,
Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or by
applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
PENTEGRA DENTAL GROUP, INC.
By: /s/ James L. Dunn, Jr.
-------------------------------------
Its: Senior Vice President
-------------------------------------
/s/ Jimmy F. Pinner, D.D.S.
----------------------------------------
Jimmy F. Pinner, D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 [intentionally omitted]
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
OMER K. REED, D.D.S., LTD.
and
OMER K. REED, D.D.S.
<PAGE>
TABLE OF CONTENTS
PAGE
----
Section 1. TERMS OF THE REORGANIZATION
1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . . 2
1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . 4
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . 9
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . 12
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . 13
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . 13
Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . 14
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . 14
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . 14
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . 14
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . 14
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . 14
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . 14
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . 14
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . 14
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . 15
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . 15
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . 15
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . . 15
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . 16
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . 17
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . 18
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . 19
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . 20
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . 20
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . 21
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . 22
14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . 22
14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . 22
14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . 23
14.12 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 23
14.13 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.14 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.15 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.16 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and
executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra"), OMER K. REED, D.D.S., LTD., an Arizona
professional corporation ("Company") and OMER K. REED, D.D.S., shareholder of
Company (referred to herein as "Shareholder" or "Shareholders").
WITNESSETH:
WHEREAS, Company operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, the Boards of Directors of the Company and Pentegra have
determined that a reorganization between each of them is in the best interests
of their respective companies;
WHEREAS, Pentegra or its affiliated designee has entered into or intends to
enter into Agreements and Plans of Reorganization, Asset Contribution Agreements
and other acquisition agreements (collectively, the "Other Agreements") with
such persons or entities or the stockholders of such entities listed on EXHIBIT
A (together with Company, the "Target Companies") and simultaneously with the
closing of the reorganization contemplated herein, intends to consummate its
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock");
WHEREAS, it is intended for Federal income tax purposes that the
reorganization contemplated by this Agreement shall qualify as an reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE REORGANIZATION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock
is consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".
1.2 MERGER. Subject to and upon the terms and conditions contained
herein, on the Closing Date, the Company shall be merged with and into Pentegra
(or its designated affiliate, in which case, the references herein to Pentegra
shall be to such designated affiliate and its shares of common stock) in
accordance with this Agreement and the separate corporate existence of the
Company shall thereupon cease ("Merger"). Pentegra shall be the surviving
corporation in the Merger ("Surviving Corporation") and shall continue to be
governed by the laws of the State of Delaware and the separate corporate
existence of Pentegra
<PAGE>
with all rights, privileges, powers, immunities and purposes shall continue
unaffected by the Merger. The Merger shall have the effects specified in the
Delaware General Corporation Law and the Arizona Business Corporation Law.
If all the conditions to the Merger set forth herein shall have been
fulfilled or waived in accordance herewith and this Agreement shall not have
been terminated in accordance herewith, the parties hereto shall cause to be
properly executed and filed on the Closing Date Certificates of Merger for
the Company meeting the applicable legal requirements. The Mergers shall
become effective on the Closing Date or the filing of such documents, in
accordance with applicable law, or at such later time as the parties hereto
have agreed upon and designated in such merger filings.
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of
Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation
and Bylaws of the Surviving Corporation until duly amended in accordance with
their terms.
1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra
immediately prior to the effective date of the Merger shall be the directors of
the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
Bylaws. The persons who are officers of Pentegra immediately prior to the
effective date of the Merger shall be the officers of the Surviving Corporation
and shall hold their respective offices until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal.
1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and
without any action on the part of the holder thereof, all shares of the
Company's common stock issued and outstanding on the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired and
shall cease to exist, and each holder of a certificate of representing shares of
Company common stock shall thereafter cease to have any rights with respect to
such shares except the right to receive the consideration set forth on ANNEX I
attached hereto (the "Merger Consideration"). Each share of common stock of
the Company held in treasury at the effective date of the Merger shall cease to
be outstanding and shall be cancelled and retired without payment of any
consideration therefor. On the effective date of the Merger, each share of
Pentegra Common Stock issued and outstanding shall, by virtue of he Mergers, and
without any action on the part of the holder thereof, continue unchanged and
remain outstanding as a share of validly issued, fully paid and nonassessable
share of Surviving Corporation common stock.
1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger,
the Shareholders, as the holders of a certificate or certificates representing
shares of Company common stock shall, upon surrender of such certificate or
certificates, receive the Merger Consideration, and until the certificate or
certificates of Company common stock shall have been surrendered by the
Shareholder and replaced by a certificate or certificates representing Pentegra
Common Stock (as set forth on ANNEX I), the certificate or certificates of
Company common stock shall, for all purposes be deemed to evidence ownership of
the number of shares of Pentegra Common Stock determined in accordance with the
provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the
Shareholders in the Merger shall be deemed for all purposes to have been issued
by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at
Closing the certificate or certificates representing the Company common stock
owned by them, duly endorsed in blank by the Shareholders, or accompanied by
duly executed blank stock powers, and with all necessary transfer tax and other
revenue stamps, acquired at the Shareholder's expense, affixed and cancelled.
1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement, the
Company and Shareholders shall excecute and deliver all such deeds, bills of
sale,
<PAGE>
assignments and assurances and take and do all such other actions and things
as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under the Assets in Pentegra or
otherwise to carry out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional
corporation or association, as applicable, duly organized, validly existing and
in good standing under the laws of the State of Arizona. Company has all
necessary corporate powers to own all of its assets and to carry on its business
as such business is now being conducted. Company does not own stock in or
control, directly or indirectly, any other corporation, association or business
organization, nor is Company a party to any joint venture or partnership. The
Shareholders are the sole shareholders of Company and own all outstanding shares
of capital stock free of all security interests, claims, encumbrances and liens
in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock
has been legally and validly issued and fully paid and nonassessable. No shares
of capital stock of Company are owned by Company in treasury. There are no
outstanding (a) bonds, debentures, notes or other obligations the holders of
which have the right to vote with the stockholders of Company on any matter, (b)
securities of Company convertible into equity interests in Company, or (c)
commitments, options, rights or warrants to issue any such equity interests in
Company, to issue securities of Company convertible into such equity interests,
or to redeem any securities of Company. No shares of capital stock of Company
have been issued or disposed of in violation of the preemptive rights, rights of
first refusal or similar rights of any of Company's stockholders. Company is
not required to qualify to do business as a foreign corporation in any other
state or jurisdiction by reason of its business, properties or activities in or
relating to such other state or jurisdiction. Company does not have any assets,
employees or offices in any state other than the state set forth in the first
sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power
to execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all action required by
law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to
authorize the execution, delivery and performance of this Agreement and such
related documents. Each Shareholder has the legal capacity to enter into and
perform this Agreement and the other agreements to be executed and delivered in
connection herewith. Company has obtained the approval of its stockholders
necessary to the consummation of the transactions contemplated herein. This
Agreement and all agreements and documents executed and delivered in connection
herewith have been, or will be as of the Closing Date, duly executed and
delivered by Company and Shareholders, as appropriate, and constitute or will
constitute the legal, valid and binding obligations of Company and Shareholders,
enforceable against Company and Shareholders in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of consents
described on EXHIBIT 2.4, the consummation of the actions contemplated hereby
will not, violate any provision of the Articles or Certificate of Incorporation
or Bylaws of Company or any provisions of, or result in the acceleration of, any
obligation under any mortgage, lien, lease, agreement, rent, instrument, order,
arbitration award, judgment or decree to which Company or any Shareholder is a
party or by which Company or any Shareholder is bound, or violate any material
restrictions of any kind to which Company is subject, or result in any lien or
encumbrance on any of Company's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits,
<PAGE>
certificates of occupancy, concessions, grants, franchises, licenses,
certificates of need and other governmental authorizations and approvals
required for the conduct of the Business or the use of the Assets, or waivers
thereof, have been duly obtained and are in full force and effect and are
described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Company and Shareholders, threatened, which may result in the
revocation, cancellation or suspension, or any adverse modification, of any
such licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Company or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been declared or paid by Company on any of its capital stock
since the Balance Sheet Date. No repurchase of any of Company's capital stock
has been approved, effected or is pending, or is contemplated by Company.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Company and all amendments
thereto have been delivered to Pentegra. The minute books of Company contain
accurate minutes of all meetings of and consents to actions taken without
meetings of the Board of Directors and stockholders of Company since its
formation. The books of account of Company have been kept accurately in the
ordinary course of business and the revenues, expenses, assets and liabilities
of Company have been properly recorded in such books.
2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any related
unaudited statements of income, retained earnings, schedule of accounts
receivable, accounts payable and accrued liabilities, and cash flows for the
twelve months then ended (collectively, with the related notes thereto, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and results of operations of Company as of the dates and for the
periods indicated and reflect all fixed and contingent liabilities of Company.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Company or any Shareholder leases, as lessor or lessee, real
or personal property used in operating the Business, related to the Assets or
otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in
accordance with their respective terms, and there is not under any such lease
any existing default by Company, as lessor or lessee, or any condition or event
of which any Shareholder or Company has knowledge which with notice or lapse of
time, or both, would constitute a default, in respect of which Company or
Shareholders have not taken adequate steps to cure such default or to prevent a
default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Company and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set
forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to the Closing Date and evidence of
such releases of liens and claims shall be provided to Pentegra on the Closing
Date and the Assets shall not be used to satisfy such liens, claims or
encumbrances.
<PAGE>
2.11 INVENTORIES. All of the Assets constituting inventory are owned or
used by Company, are in good, current, standard and merchantable condition and
are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Company has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Company, including the names of any entities from whom Company previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Company in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Company has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on
EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this
Agreement of: (a) the name of each director and officer of Company and the
offices held by each, (b) the most recent payroll report of Company, showing all
current employees of Company and their current levels of compensation, (c)
promised increases in compensation of employees of Company that have not yet
been effected, (d) oral or written employment agreements, consulting agreements
or independent contractor agreements (and all amendments thereto) to which
Company is a party, copies of which have been delivered to Pentegra, and (e) all
employee manuals, materials, policies, procedures and work-related rules, copies
of which have been delivered to Pentegra. Company is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Company has not engaged in any unfair labor practice.
There are no unfair labor practices charges or complaints pending or threatened
against Company, and Company has never been a party to any agreement with any
union, labor organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the Business
nor any of the Assets is subject to any pending, nor does Company or any
Shareholder have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Company, any Shareholder, the Business, the Assets or the transactions
contemplated by this Agreement, and, to the knowledge of Company and
Shareholders, no basis for any such action exists, nor is there any legal
impediment of which Company or any Shareholder has knowledge to the continued
operation of its business or the use of the Assets in the ordinary course,
subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Company has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts, obligations
and commitments of Company ("Contracts"), entered into in connection with and
related to the Assets or the Business, all of which are listed or incorporated
by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case
of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than
leases) attached hereto. Except as otherwise indicated on such Exhibits, all of
such Contracts are valid, binding and enforceable in accordance with their terms
and are in full force and effect, and no defenses, offsets or counterclaims have
been asserted or may be made by any party thereto. Except as indicated on such
Exhibits, there is not under any such Contract any existing default by Company
or any Shareholder, or any condition or event of which Company or any
Shareholder has knowledge which with notice or lapse of time, or both, would
constitute a default. Company and
<PAGE>
Shareholders have no knowledge of any default by any other party to such
Contracts. Company and Shareholders have not received notice of the
intention of any party to any Contract to cancel or terminate any Contract
and have no reason to believe that any amendment or change to any Contract is
contemplated by any party thereto. Other than those contracts, obligations
and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company
are not a party to any material written or oral agreement contract, lease or
arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product or
service;
(h) Loan agreement or other contract for money borrowed or lent or to
be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of the
Company or Shareholders, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Company on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) or entered into any contract, lease, license or
commitment, except in connection with the performance of this Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued, contingent
or otherwise) other than (i) liabilities shown or reflected on the Balance
Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary
course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(d) Made any payments to or loaned any money to any person or entity
other than in the ordinary
<PAGE>
course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have been
required due to income or operations of Company since the Balance Sheet Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants or
agents, or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of any officer, employee, consultant or agent;
(j) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties, assets
or business or the Business or the Assets, or experienced any other material
adverse change in its financial condition, assets, prospects, liabilities or
business;
(n) Declared or paid a distribution, payment or dividend of any kind
on the capital stock of Company;
(o) Repurchased, approved any repurchase or agreed to repurchase any
of Company's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Company has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it. All such tax returns are complete and accurate in all respects and
properly reflect the relevant taxes for the periods covered thereby. Company
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Company. There are no audits relating to taxes of
Company pending or in process or, to the knowledge of Company, threatened.
Company is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency. There are no
liens or encumbrances relating to taxes on or threatened against any of the
assets of Company. Company has withheld and paid all taxes required by law to
have been withheld and paid by it. Neither Company nor any predecessor of
Company is or has been a party to any tax allocation or sharing agreement or a
member of an
<PAGE>
affiliated group of corporations filing a consolidated Federal income tax
return. Company has delivered to Pentegra correct and complete copies of
Company's three most recently filed annual state, local and Federal income
tax returns, together with all examination reports and statements of
deficiencies assessed against or agreed to by Company during the three
calendar year period preceding the date of this Agreement. Company has
neither made any payments, is obligated to make any payments, or is a party
to any agreement that under any circumstance could obligate it to make any
payments that will not be deductible under Code section 280G.
(b) No Shareholder presently intends to dispose of any of the shares of
Pentegra Common Stock to be received hereunder nor is a party to any plan,
arrangement or agreement for the disposition of such shares. Company and
Shareholders have no knowledge, after due inquiry, of any such intent, plan,
arrangement or agreement by any Shareholder. Nothing contained herein shall
prohibit Shareholders from selling such shares of Pentegra Common Stock after
the designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated by
this Agreement which may be now or hereafter asserted against Pentegra, Company
or Company's shareholders resulting from any action taken by Company or any
Shareholder or their respective agents or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against
on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and
has not incurred since that date and will not have incurred as of the Closing
Date, any liabilities or obligations of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, other than those
incurred in the ordinary course of business or as set forth on EXHIBIT 2.16.
Company and Shareholders do not know, or have reasonable grounds to know, of any
basis for the assertion against Company or any Shareholder as of the Balance
Sheet Date, of any claim or liability of any nature in any amount not fully
reflected or reserved against on the Balance Sheet, or of any claim or liability
of any nature arising since that date other than those incurred in the ordinary
course of business or contemplated by this Agreement. All indebtedness of
Company (including without limitation, indebtedness for borrowed money,
guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached
hereto.
2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed
professional of Company carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the industry.
Valid and enforceable policies in such amounts are outstanding and duly in force
and will remain duly in force through the Closing Date. All such policies are
described in EXHIBIT 2.20 attached hereto and true and correct copies have been
delivered to Pentegra. Neither Shareholders nor Company have not received
notice or other communication from the issuer of any such insurance policy
cancelling or amending such policy or threatening to do so. Neither Company,
nor any Shareholder nor any licensed professional employee of Company has any
outstanding claims, settlements or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached
hereto, Company has neither established, nor maintains, nor is obligated to make
contributions to or under or otherwise participate in, (a) any bonus or other
type of compensation or employment plan, program, agreement, policy, commitment,
contract or arrangement (whether or not set forth in a written document); (b)
any pension, profit-sharing, retirement or other plan, program or arrangement;
or (c) any other employee benefit plan, fund or program, including, but not
limited to, those described in SECTION 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT
2.20 (individually "Company Plan," and collectively "Company Plans") have been
operated and administered in all material respects in accordance with all
applicable laws, rules and regulations, including without limitation, ERISA, the
Internal
<PAGE>
Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964,
as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in
Employment Act of 1967, as amended, and the related rules and regulations
adopted by those Federal agencies responsible for the administration of such
laws. No act or failure to act by Company has resulted in a "prohibited
transaction" (as defined in ERISA) with respect to the Company Plans. No
"reportable event" (as defined in ERISA) has occurred with respect to any of
the Company Plans. Company has not previously made, is not currently making,
and is not obligated in any way to make, any contributions to any
multiemployer plan within the meaning of the Multi-Employer Pension Plan
Amendments Act of 1980. With respect to each Company Plan, either (i) the
value of plan assets (including commitments under insurance contracts) is at
least equal to the value of plan liabilities or (ii) the value of plan
liabilities in excess of plan assets is disclosed on the Balance Sheet, all
as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing
Date, a party to any agreement or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree, rule or
regulation that materially and adversely affects the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Company,
the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's
licensed professional employees, and the conduct of the Business and use of the
Assets, have complied with all applicable laws, rules, regulations and licensing
requirements, including, without limitation, the Federal Environmental
Protection Act, the Occupational Safety and Health Act, the Americans with
Disabilities Act and any environmental laws and medical waste laws, and there
exist no violations by Company, any Shareholder or any licensed professional
employee of Company of any Federal, state or local law or regulation. Company
and Shareholders have not received any notice of a violation of any Federal,
state and local laws, regulations and ordinances relating to the operations of
the Business and Assets and no notice of any pending inspection or violation of
any such law, regulation or ordinance has been received by Company.
2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed
professional employee or independent contractor of Company has timely filed all
claims or other reports required to be filed with respect to the purchase of
services by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are no
pending appeals, overpayment determinations, adjustments, challenges, audit,
litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Company, any Shareholder
and each licensed professional employee of Company. Neither Company, nor any
Shareholder, nor any licensed professional employee of Company has been
convicted of, or pled guilty or nolo contendere to, patient abuse or negligence,
or any other Medicare or Medicaid program related offense and none has committed
any offense which may serve as the basis for suspension or exclusion from the
Medicare and Medicaid programs or any other third party payor program. With
respect to payors, Company, Shareholders and Company's licensed professional
employees has not (a) knowingly and willfully making or causing to be made a
false statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in determining
rights to any benefit or payment; (c) failed to disclose knowledge of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company
or Shareholders in this Agreement, and no Exhibit or certificate issued or
executed by, or information furnished by, officers or directors of Company or
any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or
in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements or facts contained therein not
misleading.
<PAGE>
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Company has with any bank or other
financial institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Company, or their respective spouses,
children or affiliates, owns directly or indirectly, on an individual or joint
basis, any interest in, has a compensation or other financial arrangement with,
or serves as an officer or director of, any customer or supplier or competitor
of Company or any organization that has a material contract or arrangement with
Company.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of
the names and addresses of each payor of Company's services which accounted for
more than 10% of revenues of Company in the preceding fiscal year. Company has
good relations with all such payors and other material payors of Company and
none of such payors has notified Company that it intends to discontinue its
relationship with Company or to deny any claims submitted to such payor for
payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Company and Shareholders as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions required
by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize
the execution, delivery and performance of this Agreement and such related
documents. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing Date,
duly executed and delivered by Pentegra and constitute or will constitute the
legal, valid and binding obligations of Pentegra, enforceable against Pentegra
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and delivery
of this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and, the
consummation of the actions contemplated hereby will not, violate any provision
of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or decree
to which Pentegra is a party or by which Pentegra is bound, or violate any
material restrictions of any kind to which Pentegra is subject, or result in any
lien or encumbrance on any of Pentegra's assets. Other than as have been
obtained or as would not have a material adverse effect, there are no consents
of any person or entity required for the transaction contemplated hereby on
behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would not
have a material adverse effect, there are no proceedings pending or, to the
knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any
<PAGE>
adverse modification, of any such licenses or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any pending,
nor does Pentegra have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Pentegra, its business, assets or the transactions contemplated by
this Agreement, and, to the knowledge of Pentegra, no basis for any such action
exists, nor is there any legal impediment of which Pentegra has knowledge to the
continued operation of its business or the use of its Assets in the ordinary
course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports and
other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it, other than as would not have a material adverse effect. Pentegra
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Pentegra. There are no audits relating to taxes of
Pentegra pending or in process or, to the knowledge of Pentegra, threatened.
Pentegra is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the reorganization contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the reorganization contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra
in this Agreement, and no Exhibit or certificate issued by officers or directors
of Pentegra and furnished or to be furnished to Company or any Shareholder
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, agree that between the
date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall
use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Company and
Shareholders agree to complete the Exhibits hereto to be provided by them in
form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the
Business and use the Assets in the ordinary course. Company and Shareholders
shall not enter into any lease, contract, indebtedness, commitment, purchase or
sale or acquire or dispose of any capital asset relating to the Business or the
Assets except in the ordinary course of business. Company and Shareholders
shall use their best efforts to preserve the Business and Assets intact and
shall not take any action that would have an adverse effect on the Business or
Assets. Company and Shareholders shall use their best efforts to preserve
intact the relationships with payors, customers, suppliers, patients and others
having significant business relations with Company. Company and Shareholders
shall collect its receivables and pay its trade payables in the ordinary
<PAGE>
course of business. Company and Shareholdes shall not introduce any new
method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and
its authorized representatives access to, and make available for inspection, all
of the assets and business of Company, the Business and the Assets, including
employees, customers and suppliers and permit Pentegra and its authorized
representatives to inspect and make copies of all documents, records and
information with respect to the business or assets of Company, the Business or
the Assets as Pentegra or its representatives may request. Company and
Shareholders shall promptly notify Pentegra in writing of (a) any notice or
communication relating to a default or event that, with notice or lapse of time
or both, could become a default, under any contract, commitment or obligation to
which Company is a party or relating to the Business or the Assets, and (b) any
adverse change in Company's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and
Shareholders shall use their best efforts to secure all necessary approvals and
consents of third parties to the consummation of the transactions contemplated
hereby, including consents described on EXHIBIT 2.4. Company and Shareholders
shall use their best efforts to obtain all licenses, permits, approvals or other
authorizations required under any law, rule, regulation, or otherwise to provide
the services of the Practice contemplated by the Service Agreement and to
conduct the intended business of the Practice and operate the Business and use
the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of Closing or the termination of this Agreement in accordance with the
provisions hereof, Company and Shareholders shall not, and shall use its best
efforts to cause Company's employees, agents and representatives not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer, including without limitation,
any proposal or offer to any Shareholder, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of Company or engage
in any negotiations concerning, or provide any confidential information or data
to, or have any discussions with, any person relating to such proposal or offer,
and Company and Shareholders will immediately cease any such activities,
discussions or negotiations heretofore conducted with respect to any of the
foregoing. Company and Shareholders shall immediately notify Pentegra if any
such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund completely
for any accrued benefits, where applicable, or vested accrued benefits for which
Company or any entity might have any liability whatsoever arising from any
insurance, pension plan, employment tax or similar liability of Company to any
employee or other person or entity (including, without limitation, any Company
Plan and any liability under employment contracts with Company) allocable to
services performed prior to the Closing Date. Company and Shareholders
acknowledge that the purpose and intent of this covenant is to assure that
Pentegra shall have no unfunded liability whatsoever at any time after the
Closing Date with respect to any of Company's employees or similar persons or
entities, including, without limitation, any Company Plan for the period prior
to the Closing Date.
4.7 EMPLOYEE MATTERS. Company shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of any Shareholder (other than in the ordinary course of business) or other
employee or an independent contractor of Company, adopt, amend or terminate any
compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect upon Company, its business, assets or
prospects.
<PAGE>
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or
dividend of any kind will be declared or paid by Company, nor will any
repurchase of any of Company's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and
Shareholders shall use their best efforts to take, or cause to be taken, all
actions necessary to effect the reorganization contemplated hereby under
applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not
change in any material respect the tax or financial accounting methods or
practices followed by Company (including any material change in any
assumption underlying, or any method of calculating, any bad debt,
contingency or other reserve), except as may be required by law or generally
accepted accounting principles. Company and Shareholders will duly,
accurately and timely (without regard to any extensions of time) file all
returns, information statements and other documents relating to taxes of
Company required to be filed by it, and pay all taxes required to be paid by
it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Company hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Company and Shareholders covenant and agree that all of the
creditors with respect to the Business and the Assets will be paid in full by
Company prior to the Closing Date, except to extent that any liability to
such creditors is assumed by Pentegra pursuant to this Agreement. If
required by Pentegra, Company and Shareholders shall furnish Pentegra with
proof of payment of all creditors with respect to the Business and the
Assets. Notwithstanding the foregoing, Company and Shareholders may dispute
the validity or amount of any such creditor's claim without being deemed to
be in violation of this SECTION 4.11, provided that such dispute is in good
faith and does not unreasonably delay the resolution of the claim and
provided, further that Company and Shareholders agree to indemnify and bond
Pentegra for such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Company leases any of its premises from any
Shareholder or other affiliate of Company or any shareholder of Company,
Pentegra shall have entered into a building lease (the "Building Lease") with
the owner of such premises on terms and conditions satisfactory to Pentegra,
the terms and conditions of which shall include, without limitation, (i) a
five year initial term plus three five-year renewal options, (ii) a lease
rate equal to the fair market value lease rate, as agreed to by Pentegra, and
(iii) such other provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate
with all requests made by Pentegra for the purpose of allowing Pentegra to
hire those non-dentist employees of Company designated by Pentegra, such
employment to be effective as of the Closing Date. Notwithstanding the
above, Company and Shareholders shall remain liable under any Company Plans
for any claims incurred by any employees or their spouses or dependents, and
for all compensation, bonuses, benefits and other such items and other
liabilities related to Company's employees incurred by Company prior to the
Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that
all employees of Company hired by Pentegra pursuant to SECTION 4.13 above,
shall be treated as "leased employees" (as defined in Code Section 414(n)) of
Company and shall be treated as Clinic employees for purposes of eligibility
and participation in Company Plans.
4.15 INSURANCE. Company shall cause Pentegra and its affiliates to
be named as an additional insured on its liability insurance programs,
effective as of the Closing Date.
4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a
limited liability company, partnership or other legal entity (the "Practice")
approved by Pentegra for the purpose of practicing dentistry
<PAGE>
and entering into the Service Agreement. The Practice shall be duly
organized, in existing and in good standing under the laws of the State in
which the practice of dentistry is conducted by the Shareholders and the
Practice. The Practice shall have all necessary power to own all of its
assets and to carry on its business as such business is now being conducted.
The Shareholders shall be the sole member/shareholder/partner of the Practice
and own all such interests free of all security interests, claims,
encumbrances and liens. Each interest in the Practice shall be legally and
validly issued and fully paid and nonassessable. There shall be no
outstanding (a) bonds, debentures, notes or other obligations the holders of
which have the right to vote with the members/partners/shareholders of the
Practice on any matter, (b) securities of the Practice convertible into
equity interests in the Practice, or (c) commitments, options, rights or
warrants to issue any such equity interests in the Practice, to issue
securities of the Practice convertible into such equity interests, or to
redeem any securities of the Practice. No interests of the Practice shall
have been issued or disposed of in violation of the preemptive rights, rights
of first refusal or similar rights of any of the Practice's
members/partners/shareholders. The Practice shall quality to do business as a
foreign entity in any other state or jurisdiction by reason of its business,
properties or activities in or relating to such other state or jurisdiction.
The Company shall have transferred the Excluded Assets set forth on EXHIBIT
4.16 to the Practice and shall have caused the Practice to assume the
Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for equity
interest in the Practice, and the Company shall have distributed such equity
interests in the Practice to the Shareholders.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation,
Bylaws/Regulations and minutes of the Practice and all amendments thereto of
the Practice shall have been delivered to Pentegra and shall be in form and
substance satisfactory to Pentegra. The minute books of the Practice shall
contain all accurate minutes of the meetings of and consents to actions taken
without meetings of the members\managers/partners/board of directors of the
Practice since its formation. The books of account of the Practice shall
have been kept accurately in the ordinary course of business and the
revenues, expenses, assets and liabilities of the Practice shall have been
properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have
the power to execute, deliver and perform its obligations under all
agreements and other documents to be executed and delivered by it pursuant to
this Agreement, including without limitation, the Service Agreement and each
Employment Agreement or to be executed and delivered on the Closing Date, and
has taken all action required by law, its Organization/Partnership
Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to
authorize the execution, delivery and performance of such documents. The
Service Agreement, the Employment Agreement and the other agreements
contemplated hereby shall have been duly executed and delivered by the
Practice and constitute or will constitute the legal, valid and binding
obligations of the Practice enforceable against the Practice in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of the
Service Agreement, the Employment Agreements and the other agreements
contemplated hereby will not violate any provision of the organizational
documents of the Practice or any provisions of, or result in the acceleration
of, any obligation under any mortgage, lien, lease, agreement, rent,
instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any
material restrictions of any kind to which the Practice is subject, or result
in any lien or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of
Organization/Partnership Agreement/Articles of Incorporation,
Bylaws/Regulations and as of the Closing Date, the Service Agreement and the
Employment Agreements, the Practice shall not be a party to or subject to any
agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with
all applicable laws, regulations and licensing requirements and have filed
with the proper authorities all necessary statements and
<PAGE>
reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its
best efforts to cause the consummation of the transactions contemplated
hereby in accordance with their terms and provisions. Pentegra agrees to
complete the Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra
shall use its best efforts to secure all necessary approvals and consents of
third parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS.
Pentegra, Shareholders and Company agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders
shall cooperate to promptly prepare and file with the Securities Exchange
Commission ("SEC") the Registration Statement on Form S-1 (or other
appropriate Form) to be filed by Pentegra in connection with its Initial
Public Offering (including the prospectus constituting a part thereof, the
"Registration Statement"). Pentegra shall obtain all necessary state
securities laws or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement and the Company and Shareholders
shall furnish all information concerning Company and Shareholders as may be
reasonable requested in connection with any such action.
Company and Shareholder represent and warrant that none of the
information or documents supplied or to be supplied by it specifically for
inclusion in the Registration Statement, by exhibit or otherwise, will, at
the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act of 1933, 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, in
light of the circumstances under which they were made, not misleading.
Company and Shareholders shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.
Company and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by
Pentegra in connection with the preparation of the Registration Statement and
each amendment or supplement thereto, or any other statement, filing, notice
or application made by or on behalf of each such party or any of its
subsidiaries to any governmental entity in connection with the transactions
contemplated by the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Company and Shareholders contained herein shall have been true
and correct in all respects when initially made and shall be
<PAGE>
true and correct in all respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Company and Shareholders prior
to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Company shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Company, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and
Pentegra shall have executed and delivered a Service Agreement (the "Service
Agreement"), in substantially the form attached hereto as EXHIBIT 7.7,
pursuant to which Pentegra will provide management services to the Practice.
Each Shareholder shall have executed and delivered a Guaranty Agreement in
substantially the form attached as EXHIBIT 4.10 of the Service Agreement
pursuant to which Shareholder shall, among other things, guaranty the
obligations of the Practice under the Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and
caused each shareholder of Company that has an existing employment agreement
with Company to have terminated his or her employment agreement with Company
and shall have executed an employment agreement ("Employment Agreement") with
the Practice in form and substance attached hereto as EXHIBIT 7.8 and
otherwise satisfactory to Company and Pentegra.
7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have
obtained all necessary government and other third-party approvals and
consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all
documents, duly executed in form satisfactory to Pentegra and its counsel,
referred to in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness,
receivables or payables between Company and its shareholders or affiliates
and Company shall not have any liabilities, including indebtedness,
guaranties and capital leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Company and Shareholders shall have named Pentegra
as an additional insured on their liability insurance program in accordance
with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no
material change in the working capital of Company since the Balance Sheet
Date.
<PAGE>
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Company and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Pentegra contained herein shall have been true and correct in
all respects when initially made and shall be true and correct in all
respects as of the Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Company shall have received all documents,
duly executed in form satisfactory to Company and its counsel, referred to in
SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business
days after requested by Pentegra, Company and Shareholders shall deliver to
Pentegra the following, all of which shall be in a form satisfactory to
counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel
for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or
letter agreement in form and substance mutually acceptable to the parties
hereto:
(a) an executed original Service Agreement and executed originals of
all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
<PAGE>
(c) a copy of the resolutions of the Board of Directors of Company
authorizing the execution, delivery and performance of this Agreement, the
Service Agreement, the Employment Agreements and all related documents and
agreements each certified by the Secretary as being true and correct copies
of the original thereof;
(d) executed merger certificate and/or plan as required by
applicable state law;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra and the original stock certificates
together with blank stock powers representing the outstanding shares of
Company common stock;
(f) certificates of the Shareholders and a duly authorized officer
of Company dated as of the Closing Date, (i) as to the truth and correctness
of the representations and warranties of Company and Shareholder contained
herein; (ii) as to the performance of and compliance by Company and
Shareholder with all covenants contained herein; and (iii) certifying that
all conditions precedent of Company and Shareholders to the Closing have been
satisfied;
(g) a certificate of the Secretary of Company certifying as to the
incumbency of the directors and officers of Company and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Company;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Company and any state of required
foreign qualification of Company establishing that Company is in existence
and is in good standing to transact business in its state of incorporation;
(i) an opinion of counsel to Company and Shareholder opining as to
the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Company, the enforceability of this Agreement and the other agreements and
documents to be executed in connection herewith, and other matters reasonably
requested by Pentegra;
(j) non-foreign affidavits executed by Company;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Company and Shareholders, the following, all of which shall
be in a form satisfactory to counsel to Company and Shareholders and shall be
held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending
Closing, pursuant to an escrow agreement or letter agreement in form and
substance mutually acceptable to the parties hereto:
(a) the Merger Consideration;
(b) an executed Service Agreement;
<PAGE>
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Company;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Company;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Company to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this
Agreement or in any Exhibit attached hereto, any agreement executed pursuant
hereto, and any certificate executed and delivered by any party pursuant to
the terms of this Agreement, shall constitute representations and warranties
of Company and Shareholders, jointly and severally, or of Pentegra, as the
case may be. All such representations and warranties, and all
representations and warranties expressly labeled as such in this Agreement
shall survive the date of this Agreement and the Closing Date for a period of
five (5) years following the Closing Date, except that (i) the
representations and warranties with respect to environmental and medical
waste laws and health care laws and matters shall survive for a period of
fifteen (15) years and tax representations shall survive until one year after
the expiration of the applicable statute of limitations. Each party covenants
with the other parties not to make any claim with respect to such
representations and warranties, against any party after the date on which
such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof,
unless such party has timely given the notice required in SECTION 10.2, 10.3
or 10.4 hereof, as the case may be. Each party hereby releases, acquits and
discharges the other party from any and all claims and demands, actions and
causes of action, damages, costs, expenses and rights of setoff with respect
to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable,
are not timely provided.
<PAGE>
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS
SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"),
SHALL INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES
(EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF
THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN
"INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES,
LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING,
BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH
APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY,
AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE
FURNISHED BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND,
PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS
SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"),
JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES,
OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE
EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND
AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS,
COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE
FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON
OF OR RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY,
AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO
BE FURNISHED BY INDEMNITOR HEREUNDER,
<PAGE>
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S
MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE
ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES,
AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON
OR AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR
CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE
OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR
OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS
SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER
ON OR AFTER THE CLOSING DATE,
(E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR
ENTITY RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM
OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND
EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN
CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN
CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS
SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS
SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE
REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO
MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after
Indemnified Person receives written notice of the commencement of any action
or other proceeding in respect of which indemnification or
<PAGE>
reimbursement may be sought hereunder, or within such lesser time as may be
provided by law for the defense of such action or proceeding, such
Indemnified Person shall notify Indemnitor thereof. If any such action or
other proceeding shall be brought against any Indemnified Person, Indemnitor
shall, upon written notice given within a reasonable time following receipt
by Indemnitor of such notice from Indemnified Person, be entitled to assume
the defense of such action or proceeding with counsel chosen by Indemnitor
and reasonably satisfactory to Indemnified Person; provided, however, that
any Indemnified Person may at its own expense retain separate counsel to
participate in such defense. Notwithstanding the foregoing, Indemnified
Person shall have the right to employ separate counsel at Indemnitor's
expense and to control its own defense of such action or proceeding if, in
the reasonable opinion of counsel to such Indemnified Person, (a) there are
or may be legal defenses available to such Indemnified Person or to other
Indemnified Persons that are different from or additional to those available
to Indemnitor and which could not be adequately advanced by counsel chosen by
Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor
and such Indemnified Person that would make such separate representation
advisable; provided, however, that in no event shall Indemnitor be required
to pay fees and expenses hereunder for more than one firm of attorneys of
Indemnified Person in any jurisdiction in any one action or proceeding or
group of related actions or proceedings. Indemnitor shall not, without the
prior written consent of any Indemnified Person, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim,
action or proceeding to which such Indemnified Person is a party unless such
settlement, compromise or consent includes an unconditional release of such
Indemnified Person from all liability arising or potentially arising from or
by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Company or any Shareholder giving
rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra
shall be entitled to offset the amount of damages incurred by it as a result
of such breach of warranty, representation, covenant or agreement against any
amounts payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of
Company or any Shareholder contained in this Agreement or in any certificate
or other document executed and delivered by Company or any Shareholder
pursuant to this Agreement is or becomes untrue or breached in any material
respect or if Company or any Shareholder fails to comply in any material
respect with any covenant or agreement contained herein, and any such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;
(c) at any time by Company or any Shareholder if any representation
or warranty of Pentegra contained in this Agreement or in any certificate or
other document executed and delivered by Pentegra pursuant to this Agreement
is or becomes untrue or breached in any material respect or if Pentegra fails
to comply in any material respect with any covenant or agreement contained
herein and such misrepresentation, noncompliance or breach is not cured,
waived or eliminated within twenty (20) days after receipt of written notice
thereof;
(d) by Pentegra, Shareholders or Company if the transaction
contemplated hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Company, that such termination is
desirable and in the best interests of Pentegra.
<PAGE>
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the
Closing Date, Shareholder shall not voluntarily (a) sell, assign, exchange,
transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i)
any shares of Pentegra Common Stock received by such party hereunder, (ii)
any interest (including without limitation, an option to buy or sell) in any
shares of Pentegra Common Stock, in whole or in part, and no such attempted
transfer shall be treated as effective for any purpose or (b) engage in any
transaction, whether or not with respect to any shares of Pentegra Common
Stock or any interest therein, the intent or effect of which is to reduce the
risk of owning shares of Pentegra Common Stock. The certificates evidencing
the Pentegra Common Stock delivered to Company pursuant to the terms hereof
will bear a legend substantially in the form set forth below and containing
such other information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge
that the shares of Pentegra Common Stock to be delivered to Company pursuant
to this Agreement have not been and will not be registered under the
Securities Act of 1933 and may not be resold without compliance with the
Securities Act of 1933. The Pentegra Common Stock to be acquired by
Shareholders pursuant to this Agreement is being acquired solely for its own
account, for investment purposes only and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution. Each Shareholder covenants, warrants and represents that none
of the shares of Pentegra Common Stock issued to it will be offered, sold,
assigned, pledged, hypothecated, transferred or otherwise disposed of except
after full compliance with all of the applicable provisions of the Securities
Act, as amended, and the rules and regulations of the Securities Exchange
Commission and applicable state securities laws and regulations. All
certificates evidencing shares of Pentegra Common Stock shall bear the
following legend in addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Company resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear
the economic risk of an investment in Pentegra Common Stock acquired
pursuant to this Agreement and can afford to sustain a total loss of such
investment and have such knowledge and experience in financial and business
matters that they are capable of evaluating the merits and risks of the
proposed investment and therefore have the capacity to protect their own
interests in connection with the acquisition of the Pentegra Common Stock.
Shareholders and their representatives have had an adequate opportunity to
ask questions and receive answers from the officers of Pentegra concerning
any and all matters relating to the background and experience of the officers
and directors of Pentegra, the plans for the operations of the business of
Pentegra, and any plans for additional acquisitions and the like.
Shareholders and their representatives have asked any and all questions in
the nature
<PAGE>
described in the preceding sentence and all questions have been answered to
their satisfaction. Shareholders are "accredited investors" as defined in
Regulation D of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Company and Shareholders agree that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally
through no fault of Company or Shareholders, (ii) disclosure is required by
law or the order of any governmental authority under color of law, provided,
that prior to disclosing any information pursuant to this clause (ii),
Company and Shareholders shall, if possible, give prior written notice
thereof to the other parties hereto, and provide such other parties hereto
with the opportunity to contest such disclosure, (iii) Company and
Shareholders reasonably believe that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party, or
(iv) Company and Shareholders are the sole and exclusive owner of such
confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Company or Shareholders of the provisions of this SECTION 13, Pentegra shall
be entitled to an injunction restraining Company and Shareholders from
disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Pentegra from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. The obligations of the parties under this SECTION 13 shall
survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions
contemplated by this Agreement will qualify as a reorganization within the
meaning of Section 368(a) of the Code. The tax returns (and schedules
thereto) of Shareholders, Company and Pentegra shall be filed in a manner
consistent with such intention and Shareholders and Pentegra shall each
provide the other with such tax information, reports, returns or schedules as
may be reasonably required to assist the other in so reporting the
transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
<PAGE>
Facsimile: (214) 953-5822
If to Company and Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any
further acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of
the parties to this Agreement shall pay all of the costs and expenses
incurred by such party in connection with the transactions contemplated by
this Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Company or any Shareholder for services
rendered in connection with negotiating and closing the transactions
contemplated by this Agreement or the documents to be executed in connection
herewith, whether or not such costs or expenses are incurred before or after
the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and
its terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Company.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF
Company AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made
for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this
Agreement are integral parts of this Agreement as if fully set forth herein,
and all statements appearing therein shall be deemed disclosed for all
purposes and not only in connection with the specific representation in which
they are explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
<PAGE>
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one and the
same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Company, be relieved from its obligations
to Company under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Company, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Company and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Company or may demand from Company, and Company agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Companys or Shareholders (hereinafter referred to as a "Party"), whether made
before or after the institution of any legal proceeding, any dispute among
the parties hereto in any way arising out of, related to, or in connection
with this Agreement (hereinafter a "Dispute"), shall be resolved by binding
arbitration in accordance with the terms of this Section (hereinafter the
"Arbitration Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
<PAGE>
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or foreclosing upon any
personal property in which there has been granted a security interest or lien
by a Party in the Documents. In Disputes involving indebtedness or other
monetary obligations, each Party agrees that the other Party may proceed
against all liable persons, jointly and severally against one or more of
them, without impairing rights against other liable persons. Nor shall a
Party be required to join the principal obligor or any other liable persons
(e.g., sureties or guarantors) in any proceeding against a particular person.
A Party may release or settle with one or more liable persons as the Party
deems fit without releasing or impairing rights to proceed against any
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoeniz,
Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or by
applicable law or regulation.
<PAGE>
14.16 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
OMER K. REED, D.D.S., P.C.
By: /s/ Omer K. Reed
----------------------------------------
Its:
--------------------------------------
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
----------------------------------------
Its: Senior VP
--------------------------------------
/s/ Omer K. Reed, D.D.S.
-------------------------------------------
Omer K. Reed, D.D.S.
<PAGE>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
Annex I Merger Consideration
A Target Companies
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment
Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
4.16 Excluded Assets and Excluded Liabilities
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
RICHARD REINITZ, D.D.S., P.C.
and
Richard Reinitz, D.D.S.
<PAGE>
TABLE OF CONTENTS
PAGE
Section 1. TERMS OF THE REORGANIZATION
1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . 2
1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . 4
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . 9
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . 12
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . 13
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 13
Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . 13
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 14
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . 14
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . 14
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . 14
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . 14
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . 14
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . 14
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . 14
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . 14
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . 14
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . 15
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 15
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . 15
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . 15
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . 15
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . 16
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . 17
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . 17
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . 18
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . 19
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . 20
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . 20
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . 21
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . 22
14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . 22
14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . 22
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . 22
14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . 22
14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . 23
14.12 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . 23
14.13 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.14 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . 23
14.15 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.16 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and
executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra"), Richard Reinitz, D.D.S., P.C. ("Company")
and Richard Reinitz, D.D.S., shareholders of Company (referred to herein as
"Shareholder" or "Shareholders").
WITNESSETH:
WHEREAS, Company operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, the Boards of Directors of the Company and Pentegra have determined
that a reorganization between each of them is in the best interests of their
respective companies;
WHEREAS, Pentegra or its affiliated designee has entered into or intends to
enter into Agreements and Plans of Reorganization, Asset Contribution Agreements
and other acquisition agreements (collectively, the "Other Agreements") with
such persons or entities or the stockholders of such entities listed on EXHIBIT
A (together with Company, the "Target Companies") and simultaneously with the
closing of the reorganization contemplated herein, intends to consummate its
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock");
WHEREAS, it is intended for Federal income tax purposes that the
reorganization contemplated by this Agreement shall qualify as an reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE REORGANIZATION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock
is consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".
1.2 MERGER. Subject to and upon the terms and conditions contained
herein, on the Closing Date, the Company shall be merged with and into Pentegra
(or its designated affiliate, in which case, the references herein to Pentegra
shall be to such designated affiliate and its shares of common stock) in
accordance with this Agreement and the separate corporate existence of the
Company shall thereupon cease ("Merger"). Pentegra shall be the surviving
corporation in the Merger ("Surviving Corporation") and shall continue to be
governed by the laws of the State of Delaware and the separate corporate
existence of
<PAGE>
Pentegra with all rights, privileges, powers, immunities and purposes shall
continue unaffected by the Merger. The Merger shall have the effects
specified in the Delaware General Corporation Law and the Business
Corporation Law. If all the conditions to the Merger set forth herein shall
have been fulfilled or waived in accordance herewith and this Agreement shall
not have been terminated in accordance herewith, the parties hereto shall
cause to be properly executed and filed on the Closing Date Certificates of
Merger for the Company meeting the applicable legal requirements. The
Mergers shall become effective on the Closing Date or the filing of such
documents, in accordance with applicable law, or at such later time as the
parties hereto have agreed upon and designated in such merger filings.
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of
Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation
and Bylaws of the Surviving Corporation until duly amended in accordance with
their terms.
1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra
immediately prior to the effective date of the Merger shall be the directors of
the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
Bylaws. The persons who are officers of Pentegra immediately prior to the
effective date of the Merger shall be the officers of the Surviving Corporation
and shall hold their respective offices until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal.
1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and
without any action on the part of the holder thereof, all shares of the
Company's common stock issued and outstanding on the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired and
shall cease to exist, and each holder of a certificate of representing shares of
Company common stock shall thereafter cease to have any rights with respect to
such shares except the right to receive the consideration set forth on ANNEX I
attached hereto (the "Merger Consideration"). Each share of common stock of
the Company held in treasury at the effective date of the Merger shall cease to
be outstanding and shall be cancelled and retired without payment of any
consideration therefor. On the effective date of the Merger, each share of
Pentegra Common Stock issued and outstanding shall, by virtue of he Mergers, and
without any action on the part of the holder thereof, continue unchanged and
remain outstanding as a share of validly issued, fully paid and nonassessable
share of Surviving Corporation common stock.
1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger,
the Shareholders, as the holders of a certificate or certificates representing
shares of Company common stock shall, upon surrender of such certificate or
certificates, receive the Merger Consideration, and until the certificate or
certificates of Company common stock shall have been surrendered by the
Shareholder and replaced by a certificate or certificates representing Pentegra
Common Stock (as set forth on ANNEX I), the certificate or certificates of
Company common stock shall, for all purposes be deemed to evidence ownership of
the number of shares of Pentegra Common Stock determined in accordance with the
provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the
Shareholders in the Merger shall be deemed for all purposes to have been issued
by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at
Closing the certificate or certificates representing the Company common stock
owned by them, duly endorsed in blank by the Shareholders, or accompanied by
duly executed blank stock powers, and with all necessary transfer tax and other
revenue stamps, acquired at the Shareholder's expense, affixed and cancelled.
1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in
<PAGE>
this Agreement, the Company and Shareholders shall execute and deliver all
such deeds, bills of sale, assignments and assurances and take and do all
such other actions and things as may be necessary or desirable to vest,
perfect or confirm any and all right, title and interest in, to and under the
Assets in Pentegra or otherwise to carry out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, hereby represent and warrant
to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional
corporation or association, as applicable, duly organized, validly existing and
in good standing under the laws of the State of Texas. Company has all
necessary corporate powers to own all of its assets and to carry on its business
as such business is now being conducted. Company does not own stock in or
control, directly or indirectly, any other corporation, association or business
organization, nor is Company a party to any joint venture or partnership. The
Shareholders are the sole shareholders of Company and own all outstanding shares
of capital stock free of all security interests, claims, encumbrances and liens
in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock
has been legally and validly issued and fully paid and nonassessable. No shares
of capital stock of Company are owned by Company in treasury. There are no
outstanding (a) bonds, debentures, notes or other obligations the holders of
which have the right to vote with the stockholders of Company on any matter, (b)
securities of Company convertible into equity interests in Company, or (c)
commitments, options, rights or warrants to issue any such equity interests in
Company, to issue securities of Company convertible into such equity interests,
or to redeem any securities of Company. No shares of capital stock of Company
have been issued or disposed of in violation of the preemptive rights, rights of
first refusal or similar rights of any of Company's stockholders. Company is
not required to qualify to do business as a foreign corporation in any other
state or jurisdiction by reason of its business, properties or activities in or
relating to such other state or jurisdiction. Company does not have any assets,
employees or offices in any state other than the state set forth in the first
sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power
to execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all action required by
law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to
authorize the execution, delivery and performance of this Agreement and such
related documents. Each Shareholder has the legal capacity to enter into and
perform this Agreement and the other agreements to be executed and delivered in
connection herewith. Company has obtained the approval of its stockholders
necessary to the consummation of the transactions contemplated herein. This
Agreement and all agreements and documents executed and delivered in connection
herewith have been, or will be as of the Closing Date, duly executed and
delivered by Company and Shareholders, as appropriate, and constitute or will
constitute the legal, valid and binding obligations of Company and Shareholders,
enforceable against Company and Shareholders in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of consents
described on EXHIBIT 2.4, the consummation of the actions contemplated hereby
will not, violate any provision of the Articles or Certificate of Incorporation
or Bylaws of Company or any provisions of, or result in the acceleration of, any
obligation under any mortgage, lien, lease, agreement, rent, instrument, order,
arbitration award, judgment or decree to which Company or any Shareholder is a
party or by which Company or any Shareholder is bound, or violate any material
restrictions of any kind to which Company is subject, or result in any lien or
encumbrance on any of Company's assets or the Assets.
<PAGE>
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All material
building or other permits, certificates of occupancy, concessions, grants,
franchises, licenses, certificates of need and other governmental authorizations
and approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect and
are described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Company and Shareholders, threatened, which may result in the
revocation, cancellation or suspension, or any adverse modification, of any such
licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Company or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been declared or paid by Company on any of its capital stock
since the Balance Sheet Date. No repurchase of any of Company's capital stock
has been approved, effected or is pending, or is contemplated by Company.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Company and all amendments
thereto have been delivered to Pentegra. The minute books of Company contain
accurate minutes of all meetings of and consents to actions taken without
meetings of the Board of Directors and stockholders of Company since its
formation. The books of account of Company have been kept accurately in the
ordinary course of business and the revenues, expenses, assets and liabilities
of Company have been properly recorded in such books.
2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any related
unaudited statements of income, retained earnings, schedule of accounts
receivable, accounts payable and accrued liabilities, and cash flows for the
twelve months then ended (collectively, with the related notes thereto, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and results of operations of Company as of the dates and for the
periods indicated and reflect all fixed and contingent liabilities of Company.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Company or any Shareholder leases, as lessor or lessee, real
or personal property used in operating the Business, related to the Assets or
otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in
accordance with their respective terms, and there is not under any such lease
any existing default by Company, as lessor or lessee, or any condition or event
of which any Shareholder or Company has knowledge which with notice or lapse of
time, or both, would constitute a default, in respect of which Company or
Shareholders have not taken adequate steps to cure such default or to prevent a
default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Company and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for
<PAGE>
those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Company
shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those
encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior
to the Closing Date and evidence of such releases of liens and claims shall
be provided to Pentegra on the Closing Date and the Assets shall not be used
to satisfy such liens, claims or encumbrances. Pentegra acknowledges that it
has acquired the assets "where and as is" relying solely upon Pentegra's own
examination.
2.11 INVENTORIES. All of the Assets constituting inventory are owned or
used by Company, are in good, current, standard and merchantable condition and
are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Company has no right, title or interest in or to patents, patent rights,
corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT
2.12 is a listing of all names of all predecessor companies of Company,
including the names of any entities from whom Company previously acquired
significant assets. Except for off-the-shelf software licenses and except as
set forth on EXHIBIT 2.12, Company is not a licensee in respect of any patents,
trademarks, service marks, trade names, copyrights or applications therefor, or
manufacturing processes, formulas or trade secrets or similar items and no such
licenses are necessary for the conduct of the Business or the use of the Assets.
No claim is pending or has been made to the effect that the Assets or the
present or past operations of Company in connection with the Assets or Business
infringe upon or conflict with the asserted rights of others to any patents,
patent rights, manufacturing processes, trade names, trademarks, service marks,
inventions, licenses, specialized treatment protocols, copyrights, formulas,
know-how and trade secrets. Company has the sole and exclusive right to use all
Assets constituting proprietary rights without infringing or violating the
rights of any third parties and no consents of any third parties are required
for the use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on
EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this
Agreement of: (a) the name of each director and officer of Company and the
offices held by each, (b) the most recent payroll report of Company, showing all
current employees of Company and their current levels of compensation, (c)
promised increases in compensation of employees of Company that have not yet
been effected, (d) oral or written employment agreements, consulting agreements
or independent contractor agreements (and all amendments thereto) to which
Company is a party, copies of which have been delivered to Pentegra, and (e) all
employee manuals, materials, policies, procedures and work-related rules, copies
of which have been delivered to Pentegra. Company is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Company has not engaged in any unfair labor practice.
There are no unfair labor practices charges or complaints pending or threatened
against Company, and Company has never been a party to any agreement with any
union, labor organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Except as set forth on Exhibit 2.16, neither any
Shareholder, Company nor the Business nor any of the Assets is subject to any
pending, nor does Company or any Shareholder have knowledge of any threatened,
litigation, governmental investigation, condemnation or other proceeding against
or relating to or affecting Company, any Shareholder, the Business, the Assets
or the transactions contemplated by this Agreement, and, to the knowledge of
Company and Shareholders, no basis for any such action exists, nor is there any
legal impediment of which Company or any Shareholder has knowledge to the
continued operation of its business or the use of the Assets in the ordinary
course, subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Company has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts, obligations
and commitments of Company ("Contracts"), entered
<PAGE>
into in connection with and related to the Assets or the Business, all of
which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of
leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15
(in the case of Contracts other than leases) attached hereto. Except as
otherwise indicated on such Exhibits, all of such Contracts are valid,
binding and enforceable in accordance with their terms and are in full force
and effect, and no defenses, offsets or counterclaims have been asserted or
may be made by any party thereto. Except as indicated on such Exhibits,
there is not under any such Contract any existing default by Company or any
Shareholder, or any condition or event of which Company or any Shareholder
has knowledge which with notice or lapse of time, or both, would constitute a
default. Company and Shareholders have no knowledge of any default by any
other party to such Contracts. Company and Shareholders have not received
notice of the intention of any party to any Contract to cancel or terminate
any Contract and have no reason to believe that any amendment or change to
any Contract is contemplated by any party thereto. Other than those
contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13
and EXHIBIT 2.15, Company are not a party to any material written or oral
agreement contract, lease or arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor or
lessee;
(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;
(g) Agreement for the purchase from a supplier of all or substantially all
of the requirements of the Business of a particular product or service;
(h) Loan agreement or other contract for money borrowed or lent or to be
borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of the
Company or Shareholders, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Company on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) or entered into any contract, lease, license or
commitment, except in connection with the performance of this Agreement, other
than in course of business;
<PAGE>
(b) Discharged or satisfied any material lien or encumbrance, or paid or
satisfied any material obligation or liability (absolute, accrued, contingent or
otherwise) other than (i) liabilities shown or reflected on the Balance Sheet,
(ii) liabilities incurred since the Balance Sheet Date in the ordinary course of
business;
(c) Formed or acquired or disposed of any interest in any corporation,
partnership, joint venture or other entity;
(d) Made any payments to or loaned any money to any person or entity other
than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier that
has or may have, individually or in the aggregate, a material adverse effect on
the Business;
(f) Increased or established any reserve for taxes or any other liability
on its books or otherwise provided therefor, except as may have been required
due to income or operations of Company since the Balance Sheet Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to transfer
any of the Assets or any other assets used in the conduct of the Business,
canceled any debts or claims or waived any rights, except in the ordinary course
of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants or
agents, or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of any officer, employee, consultant or agent;
(j) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting any of its properties, assets or
business or the Business or the Assets, or experienced any other material
adverse change in its financial condition, assets, prospects, liabilities or
business;
(n) Declared or paid a distribution, payment or dividend of any kind on
the capital stock of Company;
(o) Repurchased, approved any repurchase or agreed to repurchase any of
Company's capital stock; or
(p) Suffered any material adverse change in the Business or to the Assets.
2.17 TAXES. (a) Company has filed all tax returns (including tax reports
and other statements)
<PAGE>
required to have been filed by it or have been properly extended, and has
paid all taxes (including any interest, penalty or additions thereto)
required to have been paid by it. All such tax returns are complete and
accurate in all respects and properly reflect the relevant taxes for the
periods covered thereby. Company has not received any notice that any tax
deficiency or delinquency has been or may be asserted against Company.
There are no audits relating to taxes of Company pending or in process or, to
the knowledge of Company, threatened. Company is not currently the
beneficiary of any waiver of any statute of limitations in respect of taxes
nor of any extension of time within which to file any tax return or to pay
any tax assessment or deficiency. There are no liens or encumbrances
relating to taxes on or threatened against any of the assets of Company.
Company has withheld and paid all taxes required by law to have been withheld
and paid by it. Neither Company nor any predecessor of Company is or has
been a party to any tax allocation or sharing agreement or a member of an
affiliated group of corporations filing a consolidated Federal income tax
return. Company has delivered to Pentegra correct and complete copies of
Company's three most recently filed annual state, local and Federal income
tax returns, together with all examination reports and statements of
deficiencies assessed against or agreed to by Company during the three
calendar year period preceding the date of this Agreement. Company has
neither made any payments, is obligated to make any payments, or is a party
to any agreement that under any circumstance could obligate it to make any
payments that will not be deductible under Code section 280G.
(b) No Shareholder presently intends to dispose of any of the shares of
Pentegra Common Stock to be received hereunder nor is a party to any plan,
arrangement or agreement for the disposition of such shares. Company and
Shareholders have no knowledge, after due inquiry, of any such intent, plan,
arrangement or agreement by any Shareholder. Nothing contained herein shall
prohibit Shareholders from selling such shares of Pentegra Common Stock after
the designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated by
this Agreement which may be now or hereafter asserted against Pentegra, Company
or Company's shareholders resulting from any action taken by Company or any
Shareholder or their respective agents or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against
on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and
has not incurred since that date and will not have incurred as of the Closing
Date, any material liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, other than
those incurred in the ordinary course of business or as set forth on EXHIBIT
2.16. Company and Shareholders do not know, or have reasonable grounds to know,
of any basis for the assertion against Company or any Shareholder as of the
Balance Sheet Date, of any claim or liability of any nature in any amount not
fully reflected or reserved against on the Balance Sheet, or of any claim or
liability of any nature arising since that date other than those incurred in the
ordinary course of business or contemplated by this Agreement. All indebtedness
of Company (including without limitation, indebtedness for borrowed money,
guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached
hereto.
2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed
professional of Company carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the industry.
Valid and enforceable policies in such amounts are outstanding and duly in force
and will remain duly in force through the Closing Date. All such policies are
described in EXHIBIT 2.20 attached hereto and true and correct copies have been
delivered to Pentegra. Neither Shareholders nor Company have not received
notice or other communication from the issuer of any such insurance policy
cancelling or amending such policy or threatening to do so. Neither Company,
nor any Shareholder nor any licensed professional employee of Company has any
outstanding claims, settlements or premiums owed against any insurance policy.
<PAGE>
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached
hereto, Company has neither established, nor maintains, nor is obligated to make
contributions to or under or otherwise participate in, (a) any bonus or other
type of compensation or employment plan, program, agreement, policy, commitment,
contract or arrangement (whether or not set forth in a written document); (b)
any pension, profit-sharing, retirement or other plan, program or arrangement;
or (c) any other employee benefit plan, fund or program, including, but not
limited to, those described in SECTION 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT
2.20 (individually "Company Plan," and collectively "Company Plans") have been
operated and administered in all material respects in accordance with all
applicable laws, rules and regulations, including without limitation, ERISA, the
Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of
1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination
in Employment Act of 1967, as amended, and the related rules and regulations
adopted by those Federal agencies responsible for the administration of such
laws. To the best of the Company's knowledge, no act or failure to act by
Company has resulted in a "prohibited transaction" (as defined in ERISA) with
respect to the Company Plans. No "reportable event" (as defined in ERISA) has
occurred with respect to any of the Company Plans. Company has not previously
made, is not currently making, and is not obligated in any way to make, any
contributions to any multiemployer plan within the meaning of the Multi-Employer
Pension Plan Amendments Act of 1980. With respect to each Company Plan, either
(i) the value of plan assets (including commitments under insurance contracts)
is at least equal to the value of plan liabilities or (ii) the value of plan
liabilities in excess of plan assets is disclosed on the Balance Sheet, all as
of the Closing Date.
2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing
Date, a party to any agreement or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree, rule or
regulation that materially and adversely affects the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Company,
the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's
licensed professional employees, and the conduct of the Business and use of the
Assets, have complied with all applicable laws, rules, regulations and licensing
requirements, including, without limitation, the Federal Environmental
Protection Act, the Occupational Safety and Health Act, the Americans with
Disabilities Act and any environmental laws and medical waste laws, and there
exist no violations by Company, any Shareholder or any licensed professional
employee of Company of any Federal, state or local law or regulation. Company
and Shareholders have not received any notice of a violation of any Federal,
state and local laws, regulations and ordinances relating to the operations of
the Business and Assets and no notice of any pending inspection or violation of
any such law, regulation or ordinance has been received by Company.
2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed
professional employee or independent contractor of Company has timely filed all
claims or other reports required to be filed with respect to the purchase of
services by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are no
pending appeals, overpayment determinations, adjustments, challenges, audit,
litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Company, any Shareholder
and each licensed professional employee of Company. Neither Company, nor any
Shareholder, nor any licensed professional employee of Company has been
convicted of, or pled guilty or nolo contendere to, patient abuse or negligence,
or any other Medicare or Medicaid program related offense and none has committed
any offense which may serve as the basis for suspension or exclusion from the
Medicare and Medicaid programs or any other third party payor program. With
respect to payors, Company, Shareholders and Company's licensed professional
employees have not (a) knowingly and willfully making
<PAGE>
or causing to be made a false statement or representation of a material fact
in any application for any benefit or payment; (b) knowingly and willfully
making or causing to be made any false statement or representation of a
material fact for use in determining rights to any benefit or payment; (c)
failed to disclose knowledge of the occurrence of any event affecting the
initial or continued right to any benefit or payment on its own behalf or on
behalf of another, with the intent to fraudulently secure such benefit or
payment; and (d) violated any applicable state anti-remuneration or
self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company
or Shareholders in this Agreement, and no Exhibit or certificate issued or
executed by, or information furnished by, officers or directors of Company or
any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or
in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements or facts contained therein not
misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Company has with any bank or other
financial institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Company (or their respective spouses,
children or affiliates) owns directly or indirectly, on an individual or joint
basis, any interest in, has a compensation or other financial arrangement with,
or serves as an officer or director of, any customer or supplier or competitor
of Company or any organization that has a material contract or arrangement with
Company.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of
the names and addresses of each payor of Company's services which accounted for
more than 10% of revenues of Company in the preceding fiscal year. Company has
good relations with all such payors and other material payors of Company and
none of such payors has notified Company that it intends to discontinue its
relationship with Company or to deny any claims submitted to such payor for
payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Company and Shareholders as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions required
by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize
the execution, delivery and performance of this Agreement and such related
documents. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing Date,
duly executed and delivered by Pentegra and constitute or will constitute the
legal, valid and binding obligations of Pentegra, enforceable against Pentegra
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and delivery
of this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and, the
consummation of the actions contemplated hereby will not, violate any provision
of the Certificate of
<PAGE>
Incorporation or Bylaws of Pentegra or any provisions of, or result in the
acceleration of, any obligation under any mortgage, lien, lease, agreement,
rent, instrument, order, arbitration award, judgment or decree to which
Pentegra is a party or by which Pentegra is bound, or violate any material
restrictions of any kind to which Pentegra is subject, or result in any lien
or encumbrance on any of Pentegra's assets. Other than as have been obtained
or as would not have a material adverse effect, there are no consents of any
person or entity required for the transaction contemplated hereby on behalf
of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Pentegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would not
have a material adverse effect, there are no proceedings pending or, to the
knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses or
permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any pending,
nor does Pentegra have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Pentegra, its business, assets or the transactions contemplated by
this Agreement, and, to the knowledge of Pentegra, no basis for any such action
exists, nor is there any legal impediment of which Pentegra has knowledge to the
continued operation of its business or the use of its Assets in the ordinary
course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports and
other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it, other than as would not have a material adverse effect. Pentegra
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Pentegra. There are no audits relating to taxes of
Pentegra pending or in process or, to the knowledge of Pentegra, threatened.
Pentegra is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the reorganization contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the reorganization contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra
in this Agreement, and no Exhibit or certificate issued by officers or directors
of Pentegra and furnished or to be furnished to Company or any Shareholder
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, agree that between the date
hereof and the Closing Date:
<PAGE>
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall
use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Company and
Shareholders agree to complete the Exhibits hereto to be provided by them in
form and substance satisfactory to both Company and Pentegra.
4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the
Business and use the Assets in the ordinary course. Company and Shareholders
shall not enter into any lease, contract, indebtedness, commitment, purchase or
sale or acquire or dispose of any capital asset relating to the Business or the
Assets except in the ordinary course of business. Company and Shareholders
shall use their best efforts to preserve the Business and Assets intact and
shall not take any action that would have an adverse effect on the Business or
Assets. Company and Shareholders shall use their best efforts to preserve
intact the relationships with payors, customers, suppliers, patients and others
having significant business relations with Company. Company and Shareholders
shall collect its receivables and pay its trade payables in the ordinary course
of business. Company and Shareholder shall not introduce any new method of
management, operations or accounting.
4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and
its authorized representatives access to, and make available for inspection, all
of the assets and business of Company, the Business and the Assets, including
employees, customers and suppliers and permit Pentegra and its authorized
representatives to inspect and make copies of all documents, records and
information with respect to the business or assets of Company, the Business or
the Assets as Pentegra or its representatives may request. Company and
Shareholders shall promptly notify Pentegra in writing of (a) any notice or
communication relating to a default or event that, with notice or lapse of time
or both, could become a default, under any contract, commitment or obligation to
which Company is a party or relating to the Business or the Assets, and (b) any
adverse change in Company's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and
Shareholders shall use their best efforts to secure all necessary approvals and
consents of third parties to the consummation of the transactions contemplated
hereby, including consents described on EXHIBIT 2.4. Company and Shareholders
shall use their best efforts to obtain all licenses, permits, approvals or other
authorizations required under any law, rule, regulation, or otherwise to provide
the services of the Practice contemplated by the Service Agreement and to
conduct the intended business of the Practice and operate the Business and use
the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of Closing or the termination of this Agreement in accordance with the
provisions hereof, Company and Shareholders shall not, and shall use its best
efforts to cause Company's employees, agents and representatives not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer, including without limitation,
any proposal or offer to any Shareholder, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of Company or engage
in any negotiations concerning, or provide any confidential information or data
to, or have any discussions with, any person relating to such proposal or offer,
and Company and Shareholders will immediately cease any such activities,
discussions or negotiations heretofore conducted with respect to any of the
foregoing. Company and Shareholders shall immediately notify Pentegra if any
such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund completely
for any accrued benefits, where applicable, or vested accrued benefits for which
Company or any entity might have any liability whatsoever arising from any
insurance, pension plan, employment tax or similar liability of Company to any
employee or other person or entity (including, without limitation, any Company
Plan and any liability under
<PAGE>
employment contracts with Company) allocable to services performed prior to
the Closing Date. Company and Shareholders acknowledge that the purpose and
intent of this covenant is to assure that Pentegra shall have no unfunded
liability whatsoever at any time after the Closing Date with respect to any
of Company's employees or similar persons or entities, including, without
limitation, any Company Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Company shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of any Shareholder (other than in the ordinary course of business) or other
employee or an independent contractor of Company, adopt, amend or terminate any
compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect upon Company, its business, assets or
prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Company, nor will any repurchase of any
of Company's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall
use their best efforts to take, or cause to be taken, all actions necessary to
effect the reorganization contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change
in any material respect the tax or financial accounting methods or practices
followed by Company (including any material change in any assumption underlying,
or any method of calculating, any bad debt, contingency or other reserve),
except as may be required by law or generally accepted accounting principles.
Company and Shareholders will duly, accurately and timely (without regard to any
extensions of time) file all returns, information statements and other documents
relating to taxes of Company required to be filed by it, and pay all taxes
required to be paid by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Company hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Company and Shareholders covenant and agree that all of the
creditors with respect to the Business and the Assets will be paid in full by
Company prior to the Closing Date, except to extent that any liability to such
creditors is assumed by Pentegra pursuant to this Agreement. If required by
Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment
of all creditors with respect to the Business and the Assets. Notwithstanding
the foregoing, Company and Shareholders may dispute the validity or amount of
any such creditor's claim without being deemed to be in violation of this
SECTION 4.11, provided that such dispute is in good faith and does not
unreasonably delay the resolution of the claim and provided, further that
Company and Shareholders agree to indemnify and bond Pentegra for such amounts
as is satisfactory to Pentegra.
4.12 LEASE. If Company leases any of its premises from any Shareholder or
other affiliate of Company or any shareholder of Company, Pentegra shall have
entered into a building lease (the "Building Lease") with the owner of such
premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, (i) a five year initial
term plus three five-year renewal options, (ii) a lease rate equal to the fair
market value lease rate, as agreed to by Pentegra, and (iii) such other
provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with
all requests made
<PAGE>
by Pentegra for the purpose of allowing Pentegra to hire those non-dentist
employees of Company employed by the Company as of the Closing Date, with
such employment to be effective as of the Closing Date. Notwithstanding the
above, Company and Shareholders shall remain liable under any Company Plans
for any claims incurred by any employees or their spouses or dependents, and
for all compensation, bonuses, benefits and other such items and other
liabilities related to Company's employees incurred by Company prior to the
Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all
employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall
be treated as "leased employees" (as defined in Code Section 414(n)) of
Company and shall be treated as Clinic employees for purposes of eligibility
and participation in Company Plans.
4.15 INSURANCE. Company shall agree to have and shall assist Pentegra and
its affiliates to be named as an additional insured on its liability insurance
programs, effective as of the Closing Date.
4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a
limited liability company, partnership or other legal entity (the "Practice")
for the purpose of practicing dentistry and entering into the Service
Agreement. The Practice shall be duly organized, in existing and in good
standing under the laws of the State in which the practice of dentistry is
conducted by the Shareholders and the Practice. The Practice shall have all
necessary power to own all of its assets and to carry on its business as such
business is now being conducted. The Shareholders shall be the sole
member/shareholder/partner of the Practice and own all such interests free of
all security interests, claims, encumbrances and liens. Each interest in the
Practice shall be legally and validly issued and fully paid and
nonassessable. There shall be no outstanding (a) bonds, debentures, notes or
other obligations the holders of which have the right to vote with the
members/partners/shareholders of the Practice on any matter, (b) securities
of the Practice convertible into equity interests in the Practice, or (c)
commitments, options, rights or warrants to issue any such equity interests
in the Practice, to issue securities of the Practice convertible into such
equity interests, or to redeem any securities of the Practice. No interests
of the Practice shall have been issued or disposed of in violation of the
preemptive rights, rights of first refusal or similar rights of any of the
Practice's members/partners/shareholders. The Practice shall quality to do
business as a foreign entity in any other state or jurisdiction by reason of
its business, properties or activities in or relating to such other state or
jurisdiction. The Company shall have transferred the Excluded Assets set
forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to
assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for
equity interest in the Practice, and the Company shall have distributed such
equity interests in the Practice to the Shareholders.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations
and minutes of the Practice and all amendments thereto of the Practice shall
have been delivered to Pentegra. The minute books of the Practice shall contain
all accurate minutes of the meetings of and consents to actions taken without
meetings of the members\managers/partners/board of directors of the Practice
since its formation. The books of account of the Practice shall have been kept
accurately in the ordinary course of business and the revenues, expenses, assets
and liabilities of the Practice shall have been properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements and
other documents to be executed and delivered by it pursuant to this Agreement,
including without limitation, the Service Agreement and each Employment
Agreement to be executed and delivered on the Closing Date, and has taken all
action required by law, its Organization/Partnership Agreement/Articles of
Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution,
delivery and performance of such documents. The Service Agreement, the
Employment Agreement and the other agreements contemplated hereby shall have
been duly executed and
<PAGE>
delivered by the Practice on the Closing Date and constitute or will
constitute the legal, valid and binding obligations of the Practice
enforceable against the Practice in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of the Service Agreement, the
Employment Agreements and the other agreements contemplated hereby will not
violate any provision of the organizational documents of the Practice or any
provisions of, or result in the acceleration of, any obligation under any
mortgage, lien, lease, agreement, rent, instrument, order, arbitration award,
judgment or decree to which the Practice is a party or by which the Practice
is bound, or violate any material restrictions of any kind to which the
Practice is subject, or result in any lien or encumbrance on any of the
Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and have filed with the
proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra and Company agree to
complete the Exhibits hereto to be provided by both parties.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS.
Pentegra, Shareholders and Company agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall
cooperate to promptly prepare and file with the Securities Exchange Commission
("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to
be filed by Pentegra in connection with its Initial Public Offering (including
the prospectus constituting a part thereof, the "Registration Statement").
Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits
and approvals required to carry out the transactions contemplated by this
Agreement and the Company and Shareholders shall furnish all information
concerning Company and Shareholders as may be reasonable requested in connection
with any such action.
Company and Shareholder represent and warrant that none of the information or
documents supplied or to be supplied by it specifically for inclusion in the
Registration Statement, by exhibit or otherwise, will, at the time the
Registration Statement and each amendment or supplement thereto, if any, becomes
effective under the Securities Act of 1933, 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, in light of the circumstances under
which they were made, not misleading. Company and Shareholders shall be
entitled to review the Registration Statement and each amendment thereto, if
any, prior to the time each becomes
<PAGE>
effective under the Securities Act of 1933.
Company and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by Pentegra
in connection with the preparation of the Registration Statement and each
amendment or supplement thereto, or any other statement, filing, notice or
application made by or on behalf of each such party or any of its subsidiaries
to any governmental entity in connection with the transactions contemplated by
the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at or
prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Company and Shareholders contained herein shall have been true and correct in
all respects when initially made and shall be true and correct in all respects
as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Company and Shareholders prior to
the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Company shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Company, the Business and the Assets, the results of which shall
be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a mutually agreeable Service Agreement (the
"Service Agreement"), which may be in the form attached hereto as EXHIBIT 7.7,
and otherwise satisfactory to Company and Pentegra, pursuant to which Pentegra
will provide management services to the Practice. Each Shareholder shall have
executed and delivered a mutually agreeable Guaranty Agreement which may be in
the form attached as EXHIBIT 4.10, and otherwise satisfactory to Company and
Pentegra, of the Service Agreement pursuant to which Shareholder shall, among
other things, guaranty the obligations of the Practice under the Service
Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused
each shareholder of Company that has an existing employment agreement with
Company to have terminated his or her employment agreement with Company and
shall have executed a mutually acceptable employment agreement ("Employment
Agreement") with the Practice, which may be in the form attached hereto as
EXHIBIT 7.8 and otherwise satisfactory to Company and Pentegra.
<PAGE>
7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained
all necessary government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly
executed in form satisfactory to Pentegra and its counsel, referred to in
SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or
payables between Company and its shareholders or affiliates and Company shall
not have any liabilities, including indebtedness, guaranties and capital leases,
that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an
additional insured on their liability insurance program in accordance with
SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Company since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Company and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Pentegra contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Company shall have received all documents, duly
executed in form satisfactory to Company and its counsel, referred to in
SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by
<PAGE>
Pentegra, subject only to official notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. On or before the Closing Date,
Company and Shareholders shall deliver to Pentegra the following, all of which
shall be in a form satisfactory to counsel to Pentegra and shall be held by
Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing,
pursuant to an escrow agreement or letter agreement in form and substance
mutually acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals of all
documents required by that agreement, including but not limited to the Guaranty
Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of Company
authorizing the execution, delivery and performance of this Agreement, the
Service Agreement, the Employment Agreements and all related documents and
agreements each certified by the Secretary as being true and correct copies of
the original thereof;
(d) executed merger certificate and/or plan as required by applicable
state law;
(e) an assignment of each contract, agreement and lease being assigned to
and assumed by Pentegra and the original stock certificates together with blank
stock powers representing the outstanding shares of Company common stock;
(f) certificates of the Shareholders and a duly authorized officer of
Company dated as of the Closing Date, (i) as to the truth and correctness of the
representations and warranties of Company and Shareholder contained herein; (ii)
as to the performance of and compliance by Company and Shareholder with all
covenants contained herein; and (iii) certifying that all conditions precedent
of Company and Shareholders to the Closing have been satisfied;
(g) a certificate of the Secretary of Company certifying as to the
incumbency of the directors and officers of Company and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Company;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Company and any state of required
foreign qualification of Company establishing that Company is in existence and
is in good standing to transact business in its state of incorporation;
(i) an opinion of counsel to Company and Shareholder opining as to the
execution and delivery of this Agreement and the other documents and agreements
to be executed pursuant hereto, the good standing and authority of Company, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Pentegra;
(j) non-foreign affidavits executed by Company;
(k) all authorizations, consents, approvals, permits and licenses referred
to in SECTIONS 2.3 and 2.4;
<PAGE>
(l) an executed Registration Rights Agreement between Pentegra and
Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall
deliver to Company and Shareholders, the following, all of which shall be in a
form satisfactory to counsel to Company and Shareholders and shall be held by
Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing,
pursuant to an escrow agreement or letter agreement in form and substance
mutually acceptable to the parties hereto:
(a) the Merger Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being assigned to
and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra (or a
committee thereof) authorizing the execution, delivery and performance of this
Agreement and all related documents and agreements each certified by the
Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the Closing
Date, (i) as to the truth and correctness of the representations and warranties
of Pentegra contained herein; (ii) as to the performance of and compliance by
Pentegra with all covenants contained herein; and (iii) certifying that all
conditions precedent of Pentegra to the Closing have been satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and the
State of incorporation of Company;
(h) an opinion of counsel to Pentegra opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Pentegra, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Company;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Company to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
<PAGE>
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in
any Exhibit attached hereto, any agreement executed pursuant hereto, and any
certificate executed and delivered by any party pursuant to the terms of this
Agreement, shall constitute representations and warranties of Company and
Shareholders, jointly and severally, or of Pentegra, as the case may be. All
such representations and warranties, and all representations and warranties
expressly labeled as such in this Agreement shall survive the date of this
Agreement and the Closing Date for a period of five (5) years following the
Closing Date, except that (i) the representations and warranties with respect to
environmental and medical waste laws and health care laws and matters shall
survive for a period of fifteen (15) years and tax representations shall survive
until one year after the expiration of the applicable statute of limitations.
Each party covenants with the other parties not to make any claim with respect
to such representations and warranties, against any party after the date on
which such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless
such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4
hereof, as the case may be. Each party hereby releases, acquits and discharges
the other party from any and all claims and demands, actions and causes of
action, damages, costs, expenses and rights of setoff with respect to which the
notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely
provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD COMPANY AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS
AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR
PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN
"INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES,
LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING,
BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL)
ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY
PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF,
OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
(D) ANY LIABILITY OF PENTEGRA FOR COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEY'S FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION,
PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE
OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION
<PAGE>
HEREWITH.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR
TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3
AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND
SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS,
DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND
EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH
RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER
THE CLOSING DATE,
(D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL
LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION
ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS
RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER
THE CLOSING DATE,
(E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY
RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A
RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH
THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
<PAGE>
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND
PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS
SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION
STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR
SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED
OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS
SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the defense
of such action or proceeding, such Indemnified Person shall notify Indemnitor
thereof. If any such action or other proceeding shall be brought against any
Indemnified Person, Indemnitor shall, upon written notice given within a
reasonable time following receipt by Indemnitor of such notice from Indemnified
Person, be entitled to assume the defense of such action or proceeding with
counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person;
provided, however, that any Indemnified Person may at its own expense retain
separate counsel to participate in such defense. Notwithstanding the foregoing,
Indemnified Person shall have the right to employ separate counsel at
Indemnitor's expense and to control its own defense of such action or proceeding
if, in the reasonable opinion of counsel to such Indemnified Person, (a) there
are or may be legal defenses available to such Indemnified Person or to other
Indemnified Persons that are different from or additional to those available to
Indemnitor and which could not be adequately advanced by counsel chosen by
Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor
and such Indemnified Person that would make such separate representation
advisable; provided, however, that in no event shall Indemnitor be required to
pay fees and expenses hereunder for more than one firm of attorneys of
Indemnified Person in any jurisdiction in any one action or proceeding or group
of related actions or proceedings. Indemnitor shall not, without the prior
written consent of any Indemnified Person, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding to which such Indemnified Person is a party unless such settlement,
compromise or consent includes an unconditional release of such Indemnified
Person from all liability arising or potentially arising from or by reason of
such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Company or any Shareholder giving
rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra
shall be entitled to offset the amount of damages incurred by it as a result
of such breach of warranty, representation, covenant or agreement against any
amounts payable by Pentegra, including the amounts payable under the Service
Agreement.
<PAGE>
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Company
or any Shareholder contained in this Agreement or in any certificate or other
document executed and delivered by Company or any Shareholder pursuant to this
Agreement is or becomes untrue or breached in any material respect or if Company
or any Shareholder fails to comply in any material respect with any covenant or
agreement contained herein, and any such misrepresentation, noncompliance or
breach is not cured, waived or eliminated within twenty (20) days after receipt
of written notice thereof;
(c) at any time by Company or any Shareholder if any representation or
warranty of Pentegra contained in this Agreement or in any certificate or other
document executed and delivered by Pentegra pursuant to this Agreement is or
becomes untrue or breached in any material respect or if Pentegra fails to
comply in any material respect with any covenant or agreement contained herein
and such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra, Shareholders or Company if the transaction contemplated
hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Company, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date,
Shareholder shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of
Pentegra Common Stock received as consideration by such party hereunder, (ii)
any interest (including without limitation, an option to buy or sell) in any
shares of Pentegra Common Stock, received by any party hereunder as
consideration, in whole or in part, and no such attempted transfer shall be
treated as effective for any purpose or (b) engage in any transaction, whether
or not with respect to any shares of Pentegra Common Stock or any interest
therein, received by any party hereunder as consideration, the intent or effect
of which is to reduce the risk of owning shares of Pentegra Common Stock. The
certificates evidencing the Pentegra Common Stock delivered to Company pursuant
to the terms hereof will bear a legend substantially in the form set forth below
and containing such other information as Pentegra may deem necessary or
appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed, appointed
or otherwise disposed of, and the issuer shall not be required to give effect
to any attempted voluntary sale, assignment, exchange, transfer, encumbrance,
pledge, distribution, appointment or other disposition prior to _________
[date that is one year from the Closing Date]. Upon the written request of
the holder of this certificate, the issuer agrees to remove this restrictive
legend (and any stop order placed with the transfer agent) after the date
specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the
shares of Pentegra Common Stock to be delivered to Company pursuant to this
Agreement have not been and will not be registered under the Securities Act of
1933 and may not be resold without compliance with the Securities
<PAGE>
Act of 1933. The Pentegra Common Stock to be acquired by Shareholders
pursuant to this Agreement is being acquired solely for its own account, for
investment purposes only and with no present intention of distributing,
selling or otherwise disposing of it in connection with a distribution. Each
Shareholder covenants, warrants and represents that none of the shares of
Pentegra Common Stock issued to it will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the Securities Act, as
amended, and the rules and regulations of the Securities Exchange Commission
and applicable state securities laws and regulations. All certificates
evidencing shares of Pentegra Common Stock shall bear the following legend in
addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if the
holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Company resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the
economic risk of an investment in Pentegra Common Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and
have such knowledge and experience in financial and business matters that they
are capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect their own interests in connection with
the acquisition of the Pentegra Common Stock. Shareholders and their
representatives have had an adequate opportunity to ask questions and receive
answers from the officers of Pentegra concerning any and all matters relating to
the background and experience of the officers and directors of Pentegra, the
plans for the operations of the business of Pentegra, and any plans for
additional acquisitions and the like. Shareholders and their representatives
have asked any and all questions in the nature described in the preceding
sentence and all questions have been answered to their satisfaction.
Shareholders are "accredited investor" as defined in Regulation D of the
Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is a valuable, special and unique asset of
Pentegra's businesses. Company and Shareholders agree that it will not disclose
such confidential information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, unless (i) such information
becomes available to or known by the public generally through no fault of
Company or Shareholders, (ii) disclosure is required by law or the order of any
governmental authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (ii), Company and Shareholders shall, if
possible, give prior written notice thereof to the other parties hereto, and
provide such other parties hereto with the opportunity to contest such
disclosure, (iii) Company and Shareholders reasonably believe that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party, or (iv) Company and Shareholders are the sole and exclusive
owner of such confidential information as a result of the transactions
contemplated hereunder or otherwise. In the event of a breach or threatened
breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra
shall be entitled to an injunction restraining Company and Shareholders from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting Pentegra from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
The obligations of the parties under this SECTION 13 shall survive the
termination of this Agreement.
Pentegra recognizes and acknowledges that it had in the past, currently have,
and in the future may possibly have, access to certain confidential information
of Company that is a valuable, special and unique
<PAGE>
asset of Company. Pentegra agrees that it will not disclose such
confidential information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, unless (i) such
information becomes available to or known by the public generally through no
fault of Pentegra, (ii) disclosure is required by law or the order of any
governmental authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (ii), Pentegra shall, if possible,
give prior written notice thereof to the other parties hereto, and provide
such other parties hereto with the opportunity to contest such disclosure,
(iii) Pentegra reasonably believes that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party, or
(iv) Pentegra is the sole and exclusive owner of such confidential
information as a result of the transaction contemplated hereunder or
otherwise. In the event of a breach or threatened breach by Pentegra of the
provision of this SECTION 13, Company shall be entitled to an injunction
restraining Pentegra from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting Pentegra from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages. The obligations of the parties under this
SECTION 13 shall survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement will qualify as a reorganization within the meaning of Section
368(a) of the Code. The tax returns (and schedules thereto) of Shareholders,
Company and Pentegra shall be filed in a manner consistent with such intention
and Shareholders and Pentegra shall each provide the other with such tax
information, reports, returns or schedules as may be reasonably required to
assist the other in so reporting the transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery, or by
facsimile AND overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Company and Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
<PAGE>
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this Agreement,
whether or not such transactions are consummated. Without limiting the
generality of the foregoing and whether or not such liabilities may be deemed to
have been incurred in the ordinary course of business, Pentegra shall not be
liable to or required to pay, either directly or indirectly, any fees and
expenses of legal counsel, accountants, auditors or other persons or entities
retained by Company or any Shareholder for services rendered in connection with
negotiating and closing the transactions contemplated by this Agreement or the
documents to be executed in connection herewith, whether or not such costs or
expenses are incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure, either
written or oral, regarding the transactions contemplated by this Agreement
without the prior written consent of the other party, provided that the
foregoing shall not prohibit any disclosure (a) by press release, filing or
otherwise that Pentegra has determined in good faith judgment to be required by
Federal securities laws or the rules of the National Association of Securities
Dealers, (b) to attorneys, accountants, investment bankers or other agents of
the parties assisting the parties in connection with the transactions
contemplated by this Agreement, and (c) by Pentegra in connection with the
conduct of its Initial Public Offering and conducting an examination of the
operations and assets of Company.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF TEXAS AND
APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are
integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and not
only in connection with the specific representation in which they are explicitly
referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS
AND THE ESCROW ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES
AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which
<PAGE>
when so executed shall be deemed to be an original, and such counterparts
shall together constitute and be one and the same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and
shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any entity
that, through one or more intermediaries is, controlled, controlled by or under
common control with, Pentegra. Upon any such assignment prior to the Closing,
all references herein to Pentegra (including those to Pentegra Common Stock)
shall be deemed to include references to the assignee and the assignee's common
stock. Notwithstanding any such assignment, Pentegra shall not, absent a
written release from Company, be relieved from its obligations to Company under
this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or
Company, on the other hand, file suit in any court against any other party to
enforce the terms of this Agreement against the other party or to obtain
performance by it hereunder, the prevailing party will be entitled to recover
all reasonable costs, including reasonable attorneys' fees, from the other party
as part of any judgment in such suit. The term "prevailing party" shall mean the
party in whose favor final judgment after appeal (if any) is rendered with
respect to the claims asserted in the Complaint. "Reasonable attorneys' fees"
are those reasonable attorneys' fees actually incurred in obtaining a judgment
in favor of the prevailing party.
14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a pro
rata portion of all taxes levied upon the Assets for the calendar year in which
the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated
among Company and Pentegra as of the Closing Date, and the prorated amount due
Pentegra shall be credited to the cash portion of the Purchase Consideration.
Upon payment by Pentegra of such taxes actually assessed and paid on the Assets,
Pentegra shall calculate the apportionment of such taxes and shall pay Company
or may demand from Company, and Company agrees to pay, the amount necessary to
correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing, and
signed by the parties hereto. The waiver of any of the terms and conditions of
this Agreement shall not be construed as a waiver of any other terms and
conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the Company or
Shareholders (hereinafter referred to as a "Party"), whether made before or
after the institution of any legal proceeding, any dispute among the parties
hereto in any way arising out of, related to, or in connection with this
Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in
accordance with the terms of this Section (hereinafter the "Arbitration
Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in accordance
with the terms of this Arbitration Program, the Commercial Arbitration Rules of
the AAA. In the event of any inconsistency between this Arbitration Program and
those rules or statutes, then the terms of this Arbitration Program shall
control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been completed
and the arbitrators have determined each party's post-arbitration obligations
and responsibilities as it relates to such warranties and covenants. No
provision of, nor the exercise of any rights under, this Arbitration Program
shall limit the right of any Party at any time to seek or use ancillary or
<PAGE>
preliminary judicial or non-judicial self help remedies for the purposes of
obtaining, perfecting, preserving, or foreclosing upon any personal property in
which there has been granted a security interest or lien by a Party in the
Documents. In Disputes involving indebtedness or other monetary obligations,
each Party agrees that the other Party may proceed against all liable persons,
jointly and severally against one or more of them, without impairing rights
against other liable persons. Nor shall a Party be required to join the
principal obligor or any other liable persons (e.g., sureties or guarantors) in
any proceeding against a particular person. A Party may release or settle with
one or more liable persons as the Party deems fit without releasing or impairing
rights to proceed against any persons not so released. All statutes of
limitation that would otherwise be applicable shall apply to any arbitration
proceeding.
The party seeking arbitration shall notify the other Party, in writing, of
that Party's desire to arbitrate a dispute; and each Party shall, within twenty
(20) days from the date such notification is received, select an arbitrator, and
those two arbitrators shall select a third arbitrator within ten (10) days
thereafter. The issues or claims in dispute shall be committed to writing,
separately stated and numbered, and each party's proposed answers or contentions
shall be signed below the questions. Failure by a party to select an arbitrator
within the prescribed time period shall serve as that Party's acquiescence and
acceptance of the other party's selection of arbitrator. The arbitrators shall
resolve all Disputes in accordance with the applicable substantive law. Any
Dispute shall be decided by a majority vote of three arbitrators, unless the
claim or amount in controversy does not exceed $100,000.00, in which case a
single arbitrator (who shall have authority to render a maximum award of
$100,000.00, including all damages of any kind, costs and fees) may decide the
Dispute. The arbitrators may grant any remedy or relief that the arbitrators
deem just and equitable and within the scope of this Arbitration Program. The
arbitrators may also grant such ancillary relief as is necessary to make
effective the award. In all arbitration proceedings the arbitrators shall make
specific and written findings of fact and conclusions of law. In all
arbitration proceedings in which the amount in controversy exceeds $100,000.00,
in the aggregate, the Parties shall have in addition to the statutory right to
seek vacation or modification of any award pursuant to applicable law, the right
to seek vacation or modification of any award that is based in whole, or in
part, on an incorrect or erroneous ruling of law by appeal to an appropriate
court having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must be
filed in a court having jurisdiction over the Dispute within 15 days from the
date the award in rendered. The arbitrators' findings of fact shall be binding
on all Parties and shall not be subject to further review except as otherwise
allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder shall
be concluded within 180 days of the filing of the Dispute with AAA. Arbitration
proceedings hereunder shall be conducted where agreed to in writing by the
Parties or, in the absence of such agreement in Phoenix, Arizona or the
headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this
Arbitration Program shall survive any termination, amendment, or expiration of
the Documents, unless the Parties otherwise expressly agree in writing making
specific reference to this Arbitration Program. To the extent permitted by
applicable law, the arbitrator shall have the power to award recovery of all
costs and fees (including attorney's fees, administrative fees, and arbitrators'
fees) to the prevailing Party. This Arbitration Program may be amended,
changed, or modified only by a writing which specifically refers to this
Arbitration Program and which is signed by all the Parties. If any term,
covenant, condition or provision of the Arbitration Program is found to be
unlawful or invalid or unenforceable, such illegality or invalidity or
unenforceable shall not affect the legality, validity or enforceability of the
remaining parts of this Arbitration Program, and all such remaining parts hereof
shall be valid and enforceable and have full force and effect as if the illegal,
invalid or unenforceable part had not been included. Each Party agrees to keep
all Disputes and arbitration proceedings strictly confidential, except for
disclosures of information required in the ordinary course of business of the
Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be found to be
illegal, invalid or unenforceable under present or future laws, such provision
shall be fully severable and this Agreement shall be construed and enforced as
if such provision never comprised a part hereof; and the remaining provisions
hereof shall remain in full force and effect. In lieu of such provision, there
shall be added automatically as part of this Agreement, a provision as similar
in its terms to such provision as may be possible and be legal,
<PAGE>
valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
Richard Reinitz, D.D.S., P.C.
By: /s/ Richard Reinitz, D.D.S.
--------------------------------------------------
Its: President
--------------------------------------------------
PENTEGRA DENTAL GROUP, INC.
By: /s/ James L. Dunn, Jr.
--------------------------------------------------
Its: Senior Vice-President
--------------------------------------------------
/s/ Richard Reinitz, D.D.S.
------------------------------------------------------
Richard Reinitz, D.D.S.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
<S> <C>
Annex I Merger Consideration
A Target Companies
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment
Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
4.16 Excluded Assets and Excluded Liabilities
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
</TABLE>
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
AND
GREG RICHARDS, D.D.S.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 3
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 3
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 7
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 7
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 8
3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4. COVENANTS OF DENTIST.
4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 9
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 9
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . 10
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 10
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 10
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . . . . . . 10
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 11
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 11
Section 6. COVENANTS OF PENTEGRA AND DENTIST
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 12
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 12
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 12
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 12
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8. DENTIST'S CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 13
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9. CLOSING DELIVERIES
<PAGE>
9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . . . . . . 16
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 17
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 19
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . . . 20
14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . 21
14.12 NO RULE OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . 21
14.13 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . 21
14.14 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.15 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . 21
14.16 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as
of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware
corporation ("Pentegra") and Greg Richards, D.D.S. ("Dentist").
WITNESSETH:
WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires
to receive from Dentist, certain assets of Dentist;
WHEREAS, Pentegra or its affiliated designee has entered into or intends to
enter into Agreements and Plans of Reorganization, Asset Contribution Agreements
and other acquisition agreements (collectively, the "Other Agreements") with
such persons or entities or the stockholders of such entities listed on EXHIBIT
A (together with Dentist, the "Target Companies");
WHEREAS, it is intended for Federal income tax purposes that the transfers
contemplated by this Agreement, the Other Agreements and Pentegra's initial
public offering ("Initial Public Offering") of shares of its common stock, par
value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange
within the meaning of Section 351 of the Internal Revenue Code of 1986, as
amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock
is consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions
contained herein, on the Closing Date, Dentist shall convey, transfer, deliver
and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all
of Dentist's right, title and interest in and to those certain assets described
on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively
"Assets"), free and clear of all obligations, security interests, claims, liens
and encumbrances, except as specifically assumed, or taken subject to, by
Pentegra pursuant to SECTION 1.3(b) hereof.
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and
<PAGE>
contributed hereunder, and Dentist shall retain all of its right, title and
interest in and to, the assets not specifically transferred hereunder,
including without limitation, the assets described on EXHIBIT 1.2 (the
"Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Dentist contained
herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Dentist the consideration specified in
ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b)
attached hereto to the extent that such obligations, commitments, liabilities
and indebtedness are current and not otherwise in default. (the "Assumed
Liabilities"). Notwithstanding any contrary provision contained herein,
Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i)
any liability, commitment or obligation or trade payable or indebtedness not
specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on
EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default
under such contracts, leases, commitments or obligations which occurred on or
before the Closing Date; (iii) any liability for any employee benefits
payable to employees of Dentist, including, but not limited to, liabilities
arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any
liability based upon or arising out of a violation of any antitrust or
similar restraint-of-trade laws by Dentist, including, without limiting the
generality of the foregoing, any such antitrust liability which may arise in
connection with agreements, contracts, commitments or orders for the sale of
goods or provision of services by Dentist reflected on the books of Dentist
at or prior to the Closing Date; (v) any liability based upon or arising out
of any tortious or wrongful actions of Dentist, any licensed professional
employee or independent contractor of Dentist, (vi) any liability for the
payment of any taxes of Dentist, including without limitation, sales, use and
other transfer taxes and income taxes arising from or by reason of the
transactions contemplated by this Agreement; (vii) any indebtedness secured
by deeds of trust or mortgages on real property; nor (viii) any liability
incurred or to be incurred pursuant to any malpractice or other suits or
actions pending against Dentist.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement, the
Dentist shall execute and deliver all such deeds, bills of sale, assignments and
assurances and take and do all such other actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right, title and interest
in, to and under the Assets in Pentegra or otherwise to carry out this
Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
Dentist hereby represents and warrants to Pentegra as follows:
2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the
State of Texas. Dentist does not have any assets, employees or offices in any
state other than the state set forth in the first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and
perform this
<PAGE>
Agreement and the other agreements to be executed and delivered in connection
herewith. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing
Date, duly executed and delivered by Dentist and constitute or will
constitute the legal, valid and binding obligations of Dentist in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of
this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and,
subject to the receipt of consents described on EXHIBIT 2.4, the consummation
of the actions contemplated hereby will not, result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Dentist is a party or
by which Dentist is bound, or violate any material restrictions of any kind
to which Dentist is subject, or result in any lien or encumbrance on any of
Dentist's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets, or
waivers thereof, have been duly obtained and are in full force and effect and
are described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Dentist, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses or
permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Dentist.
2.5 [INTENTIONALLY DELETED].
2.6 [INTENTIONALLY DELETED].
2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any related
unaudited statements of income, retained earnings, schedule of accounts
receivable, accounts payable and accrued liabilities, and cash flows for the
twelve months then ended (collectively, with the related notes thereto, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and results of operations of Dentist as of the dates and for the
periods indicated and reflect all fixed and contingent liabilities of Dentist.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Dentist leases, as lessor or lessee, real or personal property
used in operating the Business, related to the Assets or otherwise. All such
leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their
respective terms, and there is not under any such lease any existing default by
Dentist, as lessor or lessee, or any condition or event of which Dentist has
knowledge which with notice or lapse of time, or both, would constitute a
default, in respect of which Dentist has not taken adequate steps to cure such
default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Dentist has no knowledge of any
latent defects therein.
<PAGE>
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances
set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(B)) to be released or terminated prior to the Closing Date and evidence
of such releases of liens and claims shall be provided to Pentegra on the
Closing Date and the Assets shall not be used to satisfy such liens, claims
or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned or
used by Dentist, are in good, current, standard and merchantable condition and
are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Dentist has no right, title or interest in or to patents, patent rights,
corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT
2.12 is a listing of all names of all predecessor companies of Dentist,
including the names of any entities from whom Dentist previously acquired
significant assets. Except for off-the-shelf software licenses and except as
set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of any patents,
trademarks, service marks, trade names, copyrights or applications therefor, or
manufacturing processes, formulas or trade secrets or similar items and no such
licenses are necessary for the conduct of the Business or the use of the Assets.
No claim is pending or has been made to the effect that the Assets or the
present or past operations of Dentist in connection with the Assets or Business
infringe upon or conflict with the asserted rights of others to any patents,
patent rights, manufacturing processes, trade names, trademarks, service marks,
inventions, licenses, specialized treatment protocols, copyrights, formulas,
know-how and trade secrets. Dentist has the sole and exclusive right to use all
Assets constituting proprietary rights without infringing or violating the
rights of any third parties and no consents of any third parties are required
for the use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on
EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this
Agreement of: (a) the most recent payroll report of Dentist, showing all current
employees of Dentist and their current levels of compensation, (b) promised
increases in compensation of employees of Dentist that have not yet been
effected, (c) oral or written employment agreements, consulting agreements or
independent contractor agreements (and all amendments thereto) to which Dentist
is a party, copies of which have been delivered to Pentegra, and (d) all
employee manuals, materials, policies, procedures and work-related rules, copies
of which have been delivered to Pentegra. Dentist is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Dentist has not engaged in any unfair labor practice.
There are no unfair labor practices charges or complaints pending or threatened
against Dentist, and Dentist has never been a party to any agreement with any
union, labor organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the
Assets is subject to any pending, nor does Dentist have knowledge of any
threatened, litigation, governmental investigation, condemnation or other
proceeding against or relating to or affecting Dentist, the Business, the Assets
or the transactions contemplated by this Agreement, and, to the knowledge of
Dentist, no basis for any such action exists, nor is there any legal impediment
of which Dentist has knowledge to the continued operation of its business or the
use of the Assets in the ordinary course, subject to consents set forth on
EXHIBIT 2.4.
2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts, obligations
and commitments of Dentist ("Contracts"), entered into in connection with and
related to the Assets or the Business, all of which are listed or incorporated
by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case
of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than
leases) attached hereto. Except as otherwise indicated on
<PAGE>
such Exhibits, all of such Contracts are valid, binding and enforceable in
accordance with their terms and are in full force and effect, and no
defenses, offsets or counterclaims have been asserted or may be made by any
party thereto. Except as indicated on such Exhibits, there is not under any
such Contract any existing default by Dentist, or any condition or event of
which Dentist has knowledge which with notice or lapse of time, or both,
would constitute a default. Dentist has no knowledge of any default by any
other party to such Contracts. Dentist has not received notice of the
intention of any party to any Contract to cancel or terminate any Contract
and have no reason to believe that any amendment or change to any Contract is
contemplated by any party thereto. Other than those contracts, obligations
and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist
is not a party to any material written or oral agreement contract, lease or
arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product or
service;
(h) Loan agreement or other contract for money borrowed or lent or to
be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of the
Dentist, oral or written, that provide for prepayments or deferred installment
payments; or
(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Dentist on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) or entered into any contract, lease, license or
commitment, except in connection with the performance of this Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued, contingent
or otherwise) other than (i) liabilities shown or reflected on the Balance
Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary
course of business;
<PAGE>
(c) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
(d) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(e) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have been
required due to income or operations of Dentist since the Balance Sheet Date;
(f) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(g) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(h) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants or
agents, or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of any officer, employee, consultant or agent;
(i) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00);
(j) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(k) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties, assets
or business or the Business or the Assets, or experienced any other material
adverse change in its financial condition, assets, prospects, liabilities or
business; or
(l) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it. All such tax returns are complete and accurate in all respects and
properly reflect the relevant taxes for the periods covered thereby. Dentist
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Dentist. There are no audits relating to taxes of
Dentist pending or in process or, to the knowledge of Dentist, threatened.
Dentist is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency. There are no
liens or encumbrances relating to taxes on or threatened against any of the
assets of Dentist. Dentist has withheld and paid all taxes required by law to
have been withheld and paid by it. Neither Dentist nor any predecessor of
Dentist is or has been a party to any tax allocation or sharing agreement or a
member of an affiliated group of corporations filing a consolidated Federal
income tax return. Dentist has delivered to Pentegra correct and complete
copies of Dentist's three most recently filed annual state, local and Federal
income tax returns, together with all examination reports and statements of
deficiencies assessed against or agreed to by Dentist during the three calendar
year period preceding the date of this Agreement. Dentist has neither made any
payments, is obligated to make any payments, or is a party to any agreement that
<PAGE>
under any circumstance could obligate it to make any payments that will not
be deductible under Code section 280G.
(b) Dentist does not intend to dispose of any of the shares of Pentegra
Common Stock to be received hereunder and is not a party to any plan,
arrangement or agreement for the disposition of such shares. Nothing contained
herein shall prohibit Dentist from selling such shares of Pentegra Common Stock
after the designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated by
this Agreement which may be now or hereafter asserted against Pentegra, Dentist
resulting from any action taken by Dentist or their respective agents or
employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against
on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and
has not incurred since that date and will not have incurred as of the Closing
Date, any liabilities or obligations of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, other than those
incurred in the ordinary course of business or as set forth on EXHIBIT 2.16.
Dentist does not know, or have reasonable grounds to know, of any basis for the
assertion against Dentist as of the Balance Sheet Date, of any claim or
liability of any nature in any amount not fully reflected or reserved against on
the Balance Sheet, or of any claim or liability of any nature arising since that
date other than those incurred in the ordinary course of business or
contemplated by this Agreement. All indebtedness of Dentist (including without
limitation, indebtedness for borrowed money, guaranties and capital lease
obligations) is described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist
carries property, liability, malpractice, workers' compensation and such other
types of insurance as is customary in the industry. Valid and enforceable
policies in such amounts are outstanding and duly in force and will remain duly
in force through the Closing Date. All such policies are described in EXHIBIT
2.20 attached hereto and true and correct copies have been delivered to
Pentegra. Dentist has not received notice or other communication from the
issuer of any such insurance policy cancelling or amending such policy or
threatening to do so. Neither Dentist nor any licensed professional employee of
Dentist has any outstanding claims, settlements or premiums owed against any
insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached
hereto, Dentist has neither established, nor maintains, nor is obligated to make
contributions to or under or otherwise participate in, (a) any bonus or other
type of compensation or employment plan, program, agreement, policy, commitment,
contract or arrangement (whether or not set forth in a written document); (b)
any pension, profit-sharing, retirement or other plan, program or arrangement;
or (c) any other employee benefit plan, fund or program, including, but not
limited to, those described in SECTION 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT
2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been
operated and administered in all material respects in accordance with all
applicable laws, rules and regulations, including without limitation, ERISA, the
Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of
1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination
in Employment Act of 1967, as amended, and the related rules and regulations
adopted by those Federal agencies responsible for the administration of such
laws. No act or failure to act by Dentist has resulted in a "prohibited
transaction" (as defined in ERISA) with respect to the Dentist Plans. No
"reportable event" (as defined in ERISA) has occurred with respect to any of the
Dentist Plans. Dentist has not previously made, is not currently making, and is
not obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Dentist Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at
<PAGE>
least equal to the value of plan liabilities or (ii) the value of plan
liabilities in excess of plan assets is disclosed on the Balance Sheet, all
as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing
Date, a party to any agreement or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree, rule or
regulation that materially and adversely affects the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Dentist,
the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed
professional employees, and the conduct of the Business and use of the Assets,
have complied with all applicable laws, rules, regulations and licensing
requirements, including, without limitation, the Federal Environmental
Protection Act, the Occupational Safety and Health Act, the Americans with
Disabilities Act and any environmental laws and medical waste laws, and there
exist no violations by Dentist or any licensed professional employee of Dentist
of any Federal, state or local law or regulation. Dentist has not received any
notice of a violation of any Federal, state and local laws, regulations and
ordinances relating to the operations of the Business and Assets and no notice
of any pending inspection or violation of any such law, regulation or ordinance
has been received by Dentist.
2.24 THIRD PARTY PAYORS. Dentist and each licensed professional
employee or independent contractor of Dentist has timely filed all claims or
other reports required to be filed with respect to the purchase of services
by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are
no pending appeals, overpayment determinations, adjustments, challenges,
audit, litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Dentist and each
licensed professional employee of Dentist. Neither Dentist nor any licensed
professional employee of Dentist has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Dentist and Dentist's licensed professional employees has not (a) knowingly
and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist
in this Agreement, and no Exhibit or certificate issued or executed by, or
information furnished by Dentist or to be furnished by Dentist to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Dentist has with any bank or other
financial institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or
employee or family member of Dentist, or their respective spouses, children or
affiliates, owns directly or indirectly, on an individual or joint basis, any
interest in, has a compensation or other financial arrangement with, or
<PAGE>
serves as an officer or director of, any customer or supplier or competitor of
Dentist or any organization that has a material contract or arrangement with
Dentist.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of
the names and addresses of each payor of Dentist's services which accounted for
more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has
good relations with all such payors and other material payors of Dentist and
none of such payors has notified Dentist that it intends to discontinue its
relationship with Dentist or to deny any claims submitted to such payor for
payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Dentist as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions required
by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize
the execution, delivery and performance of this Agreement and such related
documents. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing Date,
duly executed and delivered by Pentegra and constitute or will constitute the
legal, valid and binding obligations of Pentegra, enforceable against Pentegra
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and delivery
of this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and, the
consummation of the actions contemplated hereby will not, violate any provision
of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or decree
to which Pentegra is a party or by which Pentegra is bound, or violate any
material restrictions of any kind to which Pentegra is subject, or result in any
lien or encumbrance on any of Pentegra's assets. Other than as have been
obtained or as would not have a material adverse effect, there are no consents
of any person or entity required for the transaction contemplated hereby on
behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Pentegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would not
have a material adverse effect, there are no proceedings pending or, to the
knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses or
permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any pending,
nor does Pentegra have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Pentegra, its business, assets or the transactions contemplated by
this Agreement, and, to the knowledge of Pentegra, no basis for any such action
exists, nor is there any legal impediment of which Pentegra has knowledge to the
continued operation of its business or the use of its Assets in the ordinary
course.
<PAGE>
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra
in this Agreement, and no Exhibit or certificate issued by officers or directors
of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements or facts contained therein not
misleading.
SECTION 4. COVENANTS OF DENTIST.
Dentist agrees that between the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and conditions. Dentist agrees to complete the
Exhibits hereto to be provided by him in form and substance satisfactory to
Pentegra.
4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the
Assets in the ordinary course. Dentist shall not enter into any lease,
contract, indebtedness, commitment, purchase or sale or acquire or dispose of
any capital asset relating to the Business or the Assets except in the ordinary
course of business. Dentist shall use their best efforts to preserve the
Business and Assets intact and shall not take any action that would have an
adverse effect on the Business or Assets. Dentist shall use their best efforts
to preserve intact the relationships with payors, customers, suppliers, patients
and others having significant business relations with Dentist. Dentist shall
collect its receivables and pay its trade payables in the ordinary course of
business. Dentist shall not introduce any new method of management, operations
or accounting.
4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized
representatives access to, and make available for inspection, all of the assets
and business of Dentist, the Business and the Assets, including employees,
customers and suppliers and permit Pentegra and its authorized representatives
to inspect and make copies of all documents, records and information with
respect to the business or assets of Dentist, the Business or the Assets as
Pentegra or its representatives may request. Dentist shall promptly
<PAGE>
notify Pentegra in writing of (a) any notice or communication relating to a
default or event that, with notice or lapse of time or both, could become a
default, under any contract, commitment or obligation to which Dentist is a
party or relating to the Business or the Assets, and (b) any adverse change
in Dentist's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall
use his best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby, including
consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain
all licenses, permits, approvals or other authorizations required under any law,
rule, regulation, or otherwise to provide the services of the Practice
contemplated by the Service Agreement and to conduct the intended business of
the Practice and operate the Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of Closing or the termination of this Agreement in accordance with the
provisions hereof, Dentist shall not, and shall use its best efforts to cause
Dentist's employees, agents and representatives not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making or implementation
of any proposal or offer, including without limitation, any proposal or offer to
the Dentist, with respect to a merger, acquisition, consolidation or similar
transaction involving, or the purchase of all or any significant portion of the
assets or any equity securities of Dentist or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to such proposal or offer, and Dentist
will immediately cease any such activities, discussions or negotiations
heretofore conducted with respect to any of the foregoing. Dentist shall
immediately notify Pentegra if any such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund completely
for any accrued benefits, where applicable, or vested accrued benefits for which
Dentist or any entity might have any liability whatsoever arising from any
insurance, pension plan, employment tax or similar liability of Dentist to any
employee or other person or entity (including, without limitation, any Dentist
Plan and any liability under employment contracts with Dentist) allocable to
services performed prior to the Closing Date. Dentist acknowledges that the
purpose and intent of this covenant is to assure that Pentegra shall have no
liability whatsoever at any time after the Closing Date with respect to any of
Dentist's employees or similar persons or entities, including, without
limitation, any Dentist Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of the Dentist (other than in the ordinary course of business) or other employee
or an independent contractor of Dentist, adopt, amend or terminate any
compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect upon Dentist, its business, assets or
prospects.
4.8 [INTENTIONALLY OMITTED].
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best
efforts to take, or cause to be taken, all actions necessary to effect the
acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material
respect the tax or financial accounting methods or practices followed by Dentist
(including any material change in any assumption underlying, or any method of
calculating, any bad debt, contingency or other reserve), except
<PAGE>
as may be required by law or generally accepted accounting principles.
Dentist will duly, accurately and timely (without regard to any extensions of
time) file all returns, information statements and other documents relating
to taxes of Dentist required to be filed by it, and pay all taxes required to
be paid by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive
any compliance with the applicable state Bulk Transfers Act, if any. Dentist
covenants and agrees that all of the creditors with respect to the Business and
the Assets will be paid in full by Dentist prior to the Closing Date, except to
extent that any liability to such creditors is assumed by Pentegra pursuant to
this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with
proof of payment of all creditors with respect to the Business and the Assets.
Notwithstanding the foregoing, Dentist may dispute the validity or amount of any
such creditor's claim without being deemed to be in violation of this SECTION
4.11, provided that such dispute is in good faith and does not unreasonably
delay the resolution of the claim and provided, further that Dentist agrees to
indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Dentist leases any of its premises from the Dentist or
other affiliate of Dentist, Pentegra shall have entered into a building lease
(the "Building Lease") with the owner of such premises on terms and conditions
satisfactory to Pentegra, the terms and conditions of which shall include,
without limitation, (i) a five year initial term plus three five-year renewal
options, (ii) a lease rate equal to the fair market value lease rate, as agreed
to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made
by Pentegra for the purpose of allowing Pentegra to hire those non-dental
employees of Dentist designated by Pentegra, such employment to be effective as
of the Closing Date. Notwithstanding the above, Dentist shall remain liable
under any Dentist Plans for any claims incurred by any employees or their
spouses or dependents, and for all compensation, bonuses, benefits and other
such items and other liabilities related to Dentist's employees incurred by
Dentist prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all
employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be
treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and
shall be treated as Clinic employees for purposes of eligibility and
participation in Dentist Plans.
4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective as
of the Closing Date.
4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited
liability company, partnership or other legal entity (the "Practice") approved
by Pentegra for the purpose of practicing dentistry and entering into the
Service Agreement. The Practice shall be duly organized, in existing and in
good standing under the laws of the State in which the Dentist and the Practice
are to practice dentistry. The Practice shall have all necessary power to own
all of its assets and to carry on its business as such business is now being
conducted. The Dentist shall be the sole member/shareholder/partner of the
Practice and own all such interests free of all security interests, claims,
encumbrances and liens. Each interest in the Practice shall be legally and
validly issued and fully paid and nonassessable. There shall be no outstanding
(a) bonds, debentures, notes or other obligations the holders of which have the
right to vote with the members/partners/shareholders of the Practice on any
matter, (b) securities of the Practice convertible into equity interests in the
Practice, or (c) commitments, options, rights or warrants to issue any such
equity interests in the Practice, to issue securities of the Practice
convertible into such equity interests, or to redeem any securities of the
Practice. No interests of the Practice shall have been issued or disposed of in
violation of
<PAGE>
the preemptive rights, rights of first refusal or similar rights of any of the
Practice's members/partners/shareholders. The Practice shall quality to do
business as a foreign entity in any other state or jurisdiction by reason of
its business, properties or activities in or relating to such other state or
jurisdiction.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations
and minutes of the Practice and all amendments thereto of the Practice shall
have been delivered to Pentegra and shall be in form and substance satisfactory
to Pentegra. The minute books of the Practice shall contain all accurate
minutes of the meetings of and consents to actions taken without meetings of the
members\managers/partners/board of directors of the Practice since its
formation. The books of account of the Practice shall have been kept accurately
in the ordinary course of business and the revenues, expenses, assets and
liabilities of the Practice shall have been properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements and
other documents to be executed and delivered by it pursuant to this Agreement,
including without limitation, the Service Agreement and each Employment
Agreement or to be executed and delivered on the Closing Date, and has taken all
action required by law, its Organization/Partnership Agreement/Articles of
Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution,
delivery and performance of such documents. The Service Agreement, the
Employment Agreement and the other agreements contemplated hereby shall have
been duly executed and delivered by the Practice and constitute or will
constitute the legal, valid and binding obligations of the Practice enforceable
against the Practice in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of the Service Agreement, the Employment Agreements and
the other agreements contemplated hereby will not violate any provision of the
organizational documents of the Practice or any provisions of, or result in the
acceleration of, any obligation under any mortgage, lien, lease, agreement,
rent, instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any material
restrictions of any kind to which the Practice is subject, or result in any lien
or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and has filed with the
proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
<PAGE>
SECTION 6. COVENANTS OF PENTEGRA AND DENTIST.
Pentegra and Dentist agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to
promptly prepare and file with the Securities Exchange Commission ("SEC")
the Registration Statement on Form S-1 (or other appropriate Form) to be
filed by Pentegra in connection with its Initial Public Offering (including
the prospectus constituting a part thereof, the "Registration Statement").
Pentegra shall obtain all necessary state securities laws or "Blue Sky"
permits and approvals required to carry out the transactions contemplated by
this Agreement and the Dentist shall furnish all information concerning
Dentist as may be reasonable requested in connection with any such action.
Dentist represents and warrants that none of the information or documents
supplied or to be supplied by it specifically for inclusion in the
Registration Statement, by exhibit or otherwise, will, at the time the
Registration Statement and each amendment or supplement thereto, if any,
becomes effective under the Securities Act of 1933, 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, in light of
the circumstances under which they were made, not misleading. Dentist shall
be entitled to review the Registration Statement and each amendment thereto,
if any, prior to the time each becomes effective under the Securities Act of
1933.
Dentist shall furnish Pentegra will all information concerning itself and
such other matters as may be reasonable requested by Pentegra in connection
with the preparation of the Registration Statement and each amendment or
supplement thereto, or any other statement, filing, notice or application
made by or on behalf of each such party or any of its subsidiaries to any
governmental entity in connection with the transactions contemplated by the
Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Dentist contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied
with all covenants and conditions required by this Agreement to be performed
and complied with by Dentist prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Dentist shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Dentist, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
<PAGE>
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service
Agreement"), in substantially the form attached hereto as EXHIBIT 7.7,
pursuant to which Pentegra will provide management services to the Practice.
Dentist shall have executed and delivered a Guaranty Agreement in
substantially the form attached as EXHIBIT 4.10 of the Service Agreement
pursuant to which Dentist shall, among other things, guaranty the obligations
of the Practice under the Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her
employment agreement and executed an employment agreement ("Employment
Agreement") with the Practice in form and substance attached hereto as
EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra.
7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary
government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables
or payables between Dentist and its affiliates and Dentist shall not have any
liabilities, including indebtedness, guaranties and capital leases, that are
not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Dentist shall have named Pentegra as an additional
insured on its liability insurance program in accordance with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Dentist since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. DENTIST'S CONDITIONS PRECEDENT.
The obligations of Dentist hereunder are subject to fulfillment at or
prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pentegra contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
<PAGE>
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly
executed in form satisfactory to Dentist and its counsel, referred to in
SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF DENTIST. Within five business days after requested by
Pentegra, Dentist shall deliver to Pentegra the following, all of which shall
be in a form satisfactory to counsel to Pentegra and shall be held by Jackson
& Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant
to an escrow agreement or letter agreement in form and substance mutually
acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a bill of sale conveying the Assets to Pentegra;
(d) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(e) certificates of Dentist dated as of the Closing Date, (i) as to
the truth and correctness of the representations and warranties of Dentist
contained herein; (ii) as to the performance of and compliance by Dentist
with all covenants contained herein; and (iii) certifying that all conditions
precedent of Dentist to the Closing have been satisfied;
(f) an opinion of counsel to Dentist opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Dentist, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Pentegra;
(g) non-foreign affidavits executed by Dentist;
(h) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(i) an executed Registration Rights Agreement between Pentegra and
Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
<PAGE>
(j) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Dentist the following, all of which shall be in a form
satisfactory to counsel to Dentist and shall be held by Jackson & Walker,
L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an
escrow agreement or letter agreement in form and substance mutually
acceptable to the parties hereto:
(a) the Acquisition Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Dentist;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Dentist;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Dentist to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit attached hereto, any agreement executed pursuant hereto, and
any certificate executed and delivered by any party pursuant to the terms of
this Agreement, shall constitute representations and warranties of Dentist or
<PAGE>
of Pentegra, as the case may be. All such representations and warranties,
and all representations and warranties expressly labeled as such in this
Agreement shall survive the date of this Agreement and the Closing Date for a
period of five (5) years following the Closing Date, except that (i) the
representations and warranties with respect to environmental and medical
waste laws and health care laws and matters shall survive for a period of
fifteen (15) years and tax representations shall survive until one year after
the expiration of the applicable statute of limitations. Each party
covenants with the other parties not to make any claim with respect to such
representations and warranties, against any party after the date on which
such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof,
unless such party has timely given the notice required in SECTION 10.2, 10.3
or 10.4 hereof, as the case may be. Each party hereby releases, acquits and
discharges the other party from any and all claims and demands, actions and
causes of action, damages, costs, expenses and rights of setoff with respect
to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable,
are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE
EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND
AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS,
DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION 10.3
<PAGE>
AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS,
AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES
OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN
"INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES,
LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES
(INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL
THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH
RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR
AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING
HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF
OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY
THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR
AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION,
PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR
THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED
TO PENTEGRA OR ITS COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY
PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING
A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT
OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
<PAGE>
THEREIN A MATERIAL FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the
defense of such action or proceeding, such Indemnified Person shall notify
Indemnitor thereof. If any such action or other proceeding shall be brought
against any Indemnified Person, Indemnitor shall, upon written notice given
within a reasonable time following receipt by Indemnitor of such notice from
Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Dentist giving rise to
indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be
entitled to offset the amount of damages incurred by it as a result of such
breach of warranty, representation, covenant or agreement against any amounts
payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Dentist
contained in this Agreement or in any certificate or other document executed
and delivered by Dentist pursuant to this Agreement is or becomes untrue or
breached in any material respect or if Dentist fails to comply in any
material respect with any covenant or agreement contained herein, and any
such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
(c) at any time by Dentist if any representation or warranty of Pentegra
contained in this Agreement or
<PAGE>
in any certificate or other document executed and delivered by Pentegra
pursuant to this Agreement is or becomes untrue or breached in any material
respect or if Pentegra fails to comply in any material respect with any
covenant or agreement contained herein and such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
(d) by Pentegra or Dentist if the transaction contemplated hereby shall
not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Dentist, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares
of Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer
shall be treated as effective for any purpose or (b) engage in any
transaction, whether or not with respect to any shares of Pentegra Common
Stock or any interest therein, the intent or effect of which is to reduce the
risk of owning shares of Pentegra Common Stock. The certificates evidencing
the Pentegra Common Stock delivered to Dentist pursuant to the terms hereof
will bear a legend substantially in the form set forth below and containing
such other information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the
shares of Pentegra Common Stock to be delivered to Dentist pursuant to this
Agreement have not been and will not be registered under the Securities Act
of 1933 and may not be resold without compliance with the Securities Act of
1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this
Agreement is being acquired solely for its own account, for investment
purposes only and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution. Dentist
covenants, warrants and represents that none of the shares of Pentegra Common
Stock issued to it will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after full compliance with all of
the applicable provisions of the Securities Act, as amended, and the rules
and regulations of the Securities Exchange Commission and applicable state
securities laws and regulations. All certificates evidencing shares of
Pentegra Common Stock shall bear the following legend in addition to the
legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
<PAGE>
In addition, certificates evidencing shares of Pentegra Common Stock
shall bear any legend required by the securities or blue sky laws of any
state where Dentist resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic
risk of an investment in Pentegra Common Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and has
such knowledge and experience in financial and business matters that they are
capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect its own interests in connection with
the acquisition of the Pentegra Common Stock. Dentist and its
representatives have had an adequate opportunity to ask questions and receive
answers from the officers of Pentegra concerning any and all matters relating
to the background and experience of the officers and directors of Pentegra,
the plans for the operations of the business of Pentegra, and any plans for
additional acquisitions and the like. Dentist and its representatives have
asked any and all questions in the nature described in the preceding sentence
and all questions have been answered to their satisfaction. Dentist is an
"accredited investors" as defined in Regulation D of the Securities Act of
1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes
and acknowledges that it had in the past, currently have, and in the future
may possibly have, access to certain confidential information of Pentegra
that is valuable, special and unique assets of Pentegra's businesses.
Dentist agrees that it will not disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or
reason whatsoever, unless (i) such information becomes available to or known
by the public generally through no fault of Dentist, (ii) disclosure is
required by law or the order of any governmental authority under color of
law, provided, that prior to disclosing any information pursuant to this
clause (ii), Dentist shall, if possible, give prior written notice thereof to
the other parties hereto, and provide such other parties hereto with the
opportunity to contest such disclosure, (iii) Dentist reasonably believes
that such disclosure is required in connection with the defense of a lawsuit
against the disclosing party, or (iv) Dentist is the sole and exclusive owner
of such confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Dentist of the provisions of this SECTION 13, Pentegra shall be entitled to
an injunction restraining Dentist from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
Pentegra from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages. The obligations of the
parties under this SECTION 13 shall survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement, together with the transactions contemplated by the Other
Agreement and the Initial Public Offering, will qualify as an exchange
meeting the requirements of Section 351 of the Code. The tax returns (and
schedules thereto) of Dentist and Pentegra shall be filed in a manner
consistent with such intention and Dentist and Pentegra shall each provide
the other with such tax information, reports, returns or schedules as may be
reasonably required to assist the other in so reporting the transactions
contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
<PAGE>
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Dentist:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Dentist for services rendered in
connection with negotiating and closing the transactions contemplated by this
Agreement or the documents to be executed in connection herewith, whether or
not such costs or expenses are incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Dentist.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED
<PAGE>
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF
Dentist AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one and the
same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Dentist, be relieved from its obligations
to Dentist under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Dentist, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions
<PAGE>
hereof must be in writing, and signed by the parties hereto. The waiver of
any of the terms and conditions of this Agreement shall not be construed as a
waiver of any other terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Dentist (hereinafter referred to as a "Party"), whether made before or after
the institution of any legal proceeding, any dispute among the parties hereto
in any way arising out of, related to, or in connection with this Agreement
(hereinafter a "Dispute"), shall be resolved by binding arbitration in
accordance with the terms of this Section (hereinafter the "Arbitration
Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or foreclosing upon any
personal property in which there has been granted a security interest or lien
by a Party in the Documents. In Disputes involving indebtedness or other
monetary obligations, each Party agrees that the other Party may proceed
against all liable persons, jointly and severally against one or more of
them, without impairing rights against other liable persons. Nor shall a
Party be required to join the principal obligor or any other liable persons
(e.g., sureties or guarantors) in any proceeding against a particular person.
A Party may release or settle with one or more liable persons as the Party
deems fit without releasing or impairing rights to proceed against any
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoenix,
Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award
<PAGE>
recovery of all costs and fees (including attorney's fees, administrative
fees, and arbitrators' fees) to the prevailing Party. This Arbitration
Program may be amended, changed, or modified only by a writing which
specifically refers to this Arbitration Program and which is signed by all
the Parties. If any term, covenant, condition or provision of the
Arbitration Program is found to be unlawful or invalid or unenforceable, such
illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or by
applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
PENTEGRA DENTAL GROUP, INC.
By: /s/ James L. Dunn, Jr.
-----------------------------------------
Its: Senior Vice President
-----------------------------------------
/s/ Greg Richards, D.D.S.
--------------------------------------------
Greg Richards, D.D.S.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 [intentionally omitted]
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
RICHARD N. SMITH, DMD, P.C.,
and
THE PARADISE TRUST
<PAGE>
TABLE OF CONTENTS
PAGE
----
Section 1. TERMS OF THE REORGANIZATION
1.2 MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 CERTIFICATE OF INCORPORATION; BYLAWS . . . . . . . . . . . . . . . . 2
1.7 SUBSEQUENT ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS
2.1 CORPORATE EXISTENCE; GOOD STANDING . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS . . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . 3
2.4 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . 4
2.8 LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS . . . . . . . 9
2.28 PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING . . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE . . . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.18 POWER AND AUTHORITY FOR TRANSACTIONS . . . . . . . . . . . . . . . . 12
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.20 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . 13
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 13
Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . 14
7.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . 14
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.4 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . 14
7.5 DUE DILIGENCE REVIEW . . . . . . . . . . . . . . . . . . . . . . . . 14
7.6 APPROVAL BY THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . 14
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . 14
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . 14
7.9 CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . 14
7.10 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.11 DEBT AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . 14
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.13 NO CHANGE IN WORKING CAPITAL . . . . . . . . . . . . . . . . . . . . 15
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . 15
8.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . 15
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.4 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . . . 15
9.2 DELIVERIES OF PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . 17
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . 17
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . 18
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . 19
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . 20
12.2 INVESTMENTS; COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . 20
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . 21
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . 22
14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . 22
14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . 22
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . 22
14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . 22
14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . 23
14.12 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . 23
14.13 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.14 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . 23
14.15 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.16 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and
executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC.,
a Delaware corporation ("Pentegra"), RICHARD N. SMITH, DMD, P.C., a Oregon
corporation ("Company") and THE PARADISE TRUST, shareholder of Company
(referred to herein as "Shareholder" or "Shareholders").
WITNESSETH:
WHEREAS, Company operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, the Boards of Directors of the Company and Pentegra have
determined that a reorganization between each of them is in the best
interests of their respective companies;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Company, the "Target Companies")
and simultaneously with the closing of the reorganization contemplated
herein, intends to consummate its initial public offering ("Initial Public
Offering") of shares of its common stock, par value $.01 per share ("Pentegra
Common Stock");
WHEREAS, it is intended for Federal income tax purposes that the
reorganization contemplated by this Agreement shall qualify as an
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE REORGANIZATION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.2 MERGER. Subject to and upon the terms and conditions contained
herein, on the Closing Date, the Company shall be merged with and into
Pentegra (or its designated affiliate, in which case, the references herein
to Pentegra shall be to such designated affiliate and its shares of common
stock) in accordance with this Agreement and the separate corporate existence
of the Company shall thereupon cease ("Merger"). Pentegra shall be the
surviving corporation in the Merger ("Surviving Corporation") and shall
<PAGE>
continue to be governed by the laws of the State of Delaware and the separate
corporate existence of Pentegra with all rights, privileges, powers,
immunities and purposes shall continue unaffected by the Merger. The Merger
shall have the effects specified in the Delaware General Corporation Law and
the Oregon Business Corporation Law. If all the conditions to the Merger set
forth herein shall have been fulfilled or waived in accordance herewith and
this Agreement shall not have been terminated in accordance herewith, the
parties hereto shall cause to be properly executed and filed on the Closing
Date Certificates of Merger for the Company meeting the applicable legal
requirements. The Mergers shall become effective on the Closing Date or the
filing of such documents, in accordance with applicable law, or at such later
time as the parties hereto have agreed upon and designated in such merger
filings.
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of
Incorporation and Bylaws of Pentegra shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation until duly amended in
accordance with their terms.
1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra
immediately prior to the effective date of the Merger shall be the directors
of the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal
in accordance with the Surviving Corporation's Certificate of Incorporation
and Bylaws. The persons who are officers of Pentegra immediately prior to the
effective date of the Merger shall be the officers of the Surviving
Corporation and shall hold their respective offices until their successors
have been duly elected or appointed and qualified or until their earlier
death, resignation or removal.
1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and
without any action on the part of the holder thereof, all shares of the
Company's common stock issued and outstanding on the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired and
shall cease to exist, and each holder of a certificate of representing shares
of Company common stock shall thereafter cease to have any rights with
respect to such shares except the right to receive the consideration set
forth on ANNEX I attached hereto (the "Merger Consideration"). Each share of
common stock of the Company held in treasury at the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired
without payment of any consideration therefor. On the effective date of the
Merger, each share of Pentegra Common Stock issued and outstanding shall, by
virtue of the Mergers, and without any action on the part of the holder
thereof, continue unchanged and remain outstanding as a share of validly
issued, fully paid and nonassessable share of Surviving Corporation common
stock.
1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the
Merger, the Shareholders, as the holders of a certificate or certificates
representing shares of Company common stock shall, upon surrender of such
certificate or certificates, receive the Merger Consideration, and until the
certificate or certificates of Company common stock shall have been
surrendered by the Shareholder and replaced by a certificate or certificates
representing Pentegra Common Stock (as set forth on ANNEX I), the certificate
or certificates of Company common stock shall, for all purposes be deemed to
evidence ownership of the number of shares of Pentegra Common Stock
determined in accordance with the provisions of ANNEX I. All shares of
Pentegra Common Stock issuable to the Shareholders in the Merger shall be
deemed for all purposes to have been issued by Pentegra on the Closing Date.
The Shareholders shall deliver to Pentegra at Closing the certificate or
certificates representing the Company common stock owned by them, duly
endorsed in blank by the Shareholders, or accompanied by duly executed blank
stock powers, and with all necessary transfer tax and other revenue stamps,
acquired at the Shareholder's expense, affixed and cancelled.
1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date,
Pentegra shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in Pentegra its
right, title or interest in, to or under any of the Assets or otherwise to
carry out this Agreement, in return for the consideration set forth in this
<PAGE>
Agreement, the Company and Shareholders shall excecute and deliver all such
deeds, bills of sale, assignments and assurances and take and do all such
other actions and things as may be necessary or desirable to vest, perfect or
confirm any and all right, title and interest in, to and under the Assets in
Pentegra or otherwise to carry out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional
corporation or association, as applicable, duly organized, validly existing
and in good standing under the laws of the State of Oregon. Company has all
necessary corporate powers to own all of its assets and to carry on its
business as such business is now being conducted. Company does not own stock
in or control, directly or indirectly, any other corporation, association or
business organization, nor is Company a party to any joint venture or
partnership. The Shareholders are the sole shareholders of Company and own
all outstanding shares of capital stock free of all security interests,
claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each
share of Company's common stock has been legally and validly issued and fully
paid and nonassessable. No shares of capital stock of Company are owned by
Company in treasury. There are no outstanding (a) bonds, debentures, notes or
other obligations the holders of which have the right to vote with the
stockholders of Company on any matter, (b) securities of Company convertible
into equity interests in Company, or (c) commitments, options, rights or
warrants to issue any such equity interests in Company, to issue securities
of Company convertible into such equity interests, or to redeem any
securities of Company. No shares of capital stock of Company have been issued
or disposed of in violation of the preemptive rights, rights of first refusal
or similar rights of any of Company's stockholders. Company is not required
to qualify to do business as a foreign corporation in any other state or
jurisdiction by reason of its business, properties or activities in or
relating to such other state or jurisdiction. Company does not have any
assets, employees or offices in any state other than the state set forth in
the first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate
power to execute, deliver and perform this Agreement and all agreements and
other documents executed and delivered by it pursuant to this Agreement or to
be executed and delivered on the Closing Date, and has taken all action
required by law, its Articles or Certificate of Incorporation, its Bylaws or
otherwise, to authorize the execution, delivery and performance of this
Agreement and such related documents. Each Shareholder has the legal capacity
to enter into and perform this Agreement and the other agreements to be
executed and delivered in connection herewith. Company has obtained the
approval of its stockholders necessary to the consummation of the
transactions contemplated herein. This Agreement and all agreements and
documents executed and delivered in connection herewith have been, or will be
as of the Closing Date, duly executed and delivered by Company and
Shareholders, as appropriate, and constitute or will constitute the legal,
valid and binding obligations of Company and Shareholders, enforceable
against Company and Shareholders in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of
consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, violate any provision of the Articles or
Certificate of Incorporation or Bylaws of Company or any provisions of, or
result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or
decree to which Company or any Shareholder is a party or by which Company or
any Shareholder is bound, or violate any material restrictions of any kind to
which Company is subject, or result in any lien or encumbrance on any of
Company's assets or the Assets.
<PAGE>
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building
or other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Company and Shareholders, threatened, which may result in the
revocation, cancellation or suspension, or any adverse modification, of any
such licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Company or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or
dividend of any kind has been declared or paid by Company on any of its
capital stock since the Balance Sheet Date. No repurchase of any of Company's
capital stock has been approved, effected or is pending, or is contemplated
by Company.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Company and all
amendments thereto have been delivered to Pentegra. The minute books of
Company contain accurate minutes of all meetings of and consents to actions
taken without meetings of the Board of Directors and stockholders of Company
since its formation. The books of account of Company have been kept
accurately in the ordinary course of business and the revenues, expenses,
assets and liabilities of Company have been properly recorded in such books.
2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any
related unaudited statements of income, retained earnings, schedule of
accounts receivable, accounts payable and accrued liabilities, and cash flows
for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly present
the financial condition and results of operations of Company as of the dates
and for the periods indicated and reflect all fixed and contingent
liabilities of Company.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all
leases pursuant to which Company or any Shareholder leases, as lessor or
lessee, real or personal property used in operating the Business, related to
the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and
enforceable in accordance with their respective terms, and there is not under
any such lease any existing default by Company, as lessor or lessee, or any
condition or event of which any Shareholder or Company has knowledge which
with notice or lapse of time, or both, would constitute a default, in respect
of which Company or Shareholders have not taken adequate steps to cure such
default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Company and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid
and marketable title to all of the Assets, free and clear of any liens,
claims, charges, exceptions or encumbrances, except for those, if any, which
are set forth in EXHIBIT 2.10 attached hereto. Company shall cause all
encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances
indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the
Closing Date and evidence of such releases of liens and claims shall be
provided to Pentegra on the
<PAGE>
Closing Date and the Assets shall not be used to satisfy such liens, claims
or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Company, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on
EXHIBIT 2.12, Company has no right, title or interest in or to patents,
patent rights, corporate names, assumed names, manufacturing processes, trade
names, trademarks, service marks, inventions, specialized treatment
protocols, copyrights, formulas and trade secrets or similar items. Set
forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies
of Company, including the names of any entities from whom Company previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Company in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Company has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the name of each director and officer of Company
and the offices held by each, (b) the most recent payroll report of Company,
showing all current employees of Company and their current levels of
compensation, (c) promised increases in compensation of employees of Company
that have not yet been effected, (d) oral or written employment agreements,
consulting agreements or independent contractor agreements (and all
amendments thereto) to which Company is a party, copies of which have been
delivered to Pentegra, and (e) all employee manuals, materials, policies,
procedures and work-related rules, copies of which have been delivered to
Pentegra. Company is in compliance with all applicable laws, rules,
regulations and ordinances respecting employment and employment practices.
Company has not engaged in any unfair labor practice. There are no unfair
labor practices charges or complaints pending or threatened against Company,
and Company has never been a party to any agreement with any union, labor
organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the
Business nor any of the Assets is subject to any pending, nor does Company or
any Shareholder have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Company, any Shareholder, the Business, the Assets or the
transactions contemplated by this Agreement, and, to the knowledge of Company
and Shareholders, no basis for any such action exists, nor is there any legal
impediment of which Company or any Shareholder has knowledge to the continued
operation of its business or the use of the Assets in the ordinary course,
subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Company has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Company ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted or may be made
by any party thereto. Except as indicated on such Exhibits, there is not
under any such Contract any existing default by Company or any Shareholder,
or any condition or event of which Company or any Shareholder has
<PAGE>
knowledge which with notice or lapse of time, or both, would constitute a
default. Company and Shareholders have no knowledge of any default by any
other party to such Contracts. Company and Shareholders have not received
notice of the intention of any party to any Contract to cancel or terminate
any Contract and have no reason to believe that any amendment or change to
any Contract is contemplated by any party thereto. Other than those
contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13
and EXHIBIT 2.15, Company are not a party to any material written or oral
agreement contract, lease or arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
the Company or Shareholders, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Company on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16,
Company has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
<PAGE>
(d) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Company since the Balance Sheet
Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(j) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties,
assets or business or the Business or the Assets, or experienced any other
material adverse change in its financial condition, assets, prospects,
liabilities or business;
(n) Declared or paid a distribution, payment or dividend of any
kind on the capital stock of Company;
(o) Repurchased, approved any repurchase or agreed to repurchase
any of Company's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
17 TAXES. (a) Company has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Company has not received any notice that any tax deficiency or
delinquency has been or may be asserted against Company. There are no audits
relating to taxes of Company pending or in process or, to the knowledge of
Company, threatened. Company is not currently the beneficiary of any waiver
of any statute of limitations in respect of taxes nor of any extension of
time within which to file any tax return or to pay any tax assessment or
deficiency. There are no liens or encumbrances relating to taxes on or
threatened against any of the assets of Company. Company has withheld and
paid all taxes required by law to have been withheld and paid by it. Neither
Company nor any
<PAGE>
predecessor of Company is or has been a party to any tax allocation or
sharing agreement or a member of an affiliated group of corporations filing a
consolidated Federal income tax return. Company has delivered to Pentegra
correct and complete copies of Company's three most recently filed annual
state, local and Federal income tax returns, together with all examination
reports and statements of deficiencies assessed against or agreed to by
Company during the three calendar year period preceding the date of this
Agreement. Company has neither made any payments, is obligated to make any
payments, or is a party to any agreement that under any circumstance could
obligate it to make any payments that will not be deductible under Code
section 280G.
(b) No Shareholder presently intends to dispose of any of the shares of
Pentegra Common Stock to be received hereunder nor is a party to any plan,
arrangement or agreement for the disposition of such shares. Company and
Shareholders have no knowledge, after due inquiry, of any such intent, plan,
arrangement or agreement by any Shareholder. Nothing contained herein shall
prohibit Shareholders from selling such shares of Pentegra Common Stock after
the designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage
commissions or finder's or similar fees in connection with the transactions
contemplated by this Agreement which may be now or hereafter asserted against
Pentegra, Company or Company's shareholders resulting from any action taken
by Company or any Shareholder or their respective agents or employees, or any
of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Company did not have, as of the Balance Sheet
Date, and has not incurred since that date and will not have incurred as of
the Closing Date, any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
other than those incurred in the ordinary course of business or as set forth
on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable
grounds to know, of any basis for the assertion against Company or any
Shareholder as of the Balance Sheet Date, of any claim or liability of any
nature in any amount not fully reflected or reserved against on the Balance
Sheet, or of any claim or liability of any nature arising since that date
other than those incurred in the ordinary course of business or contemplated
by this Agreement. All indebtedness of Company (including without limitation,
indebtedness for borrowed money, guaranties and capital lease obligations) is
described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed
professional of Company carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the
industry. Valid and enforceable policies in such amounts are outstanding and
duly in force and will remain duly in force through the Closing Date. All
such policies are described in EXHIBIT 2.20 attached hereto and true and
correct copies have been delivered to Pentegra. Neither Shareholders nor
Company have not received notice or other communication from the issuer of
any such insurance policy cancelling or amending such policy or threatening
to do so. Neither Company, nor any Shareholder nor any licensed professional
employee of Company has any outstanding claims, settlements or premiums owed
against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Company has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company
Plan," and collectively "Company Plans") have been operated and administered
in all material respects in
<PAGE>
accordance with all applicable laws, rules and regulations, including without
limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII
of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as
amended, the Age Discrimination in Employment Act of 1967, as amended, and
the related rules and regulations adopted by those Federal agencies
responsible for the administration of such laws. No act or failure to act by
Company has resulted in a "prohibited transaction" (as defined in ERISA) with
respect to the Company Plans. No "reportable event" (as defined in ERISA) has
occurred with respect to any of the Company Plans. Company has not previously
made, is not currently making, and is not obligated in any way to make, any
contributions to any multiemployer plan within the meaning of the
Multi-Employer Pension Plan Amendments Act of 1980. With respect to each
Company Plan, either (i) the value of plan assets (including commitments
under insurance contracts) is at least equal to the value of plan liabilities
or (ii) the value of plan liabilities in excess of plan assets is disclosed
on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Company, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and
Company's licensed professional employees, and the conduct of the Business
and use of the Assets, have complied with all applicable laws, rules,
regulations and licensing requirements, including, without limitation, the
Federal Environmental Protection Act, the Occupational Safety and Health Act,
the Americans with Disabilities Act and any environmental laws and medical
waste laws, and there exist no violations by Company, any Shareholder or any
licensed professional employee of Company of any Federal, state or local law
or regulation. Company and Shareholders have not received any notice of a
violation of any Federal, state and local laws, regulations and ordinances
relating to the operations of the Business and Assets and no notice of any
pending inspection or violation of any such law, regulation or ordinance has
been received by Company.
2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed
professional employee or independent contractor of Company has timely filed
all claims or other reports required to be filed with respect to the purchase
of services by third-party payors, and all such claims or reports are
complete and accurate, and has no liability to any payor with respect
thereto. There are no pending appeals, overpayment determinations,
adjustments, challenges, audit, litigation or notices of intent to open
Medicare or Medicaid claim determinations or other reports required to be
filed by Company, any Shareholder and each licensed professional employee of
Company. Neither Company, nor any Shareholder, nor any licensed professional
employee of Company has been convicted of, or pled guilty or nolo contendere
to, patient abuse or negligence, or any other Medicare or Medicaid program
related offense and none has committed any offense which may serve as the
basis for suspension or exclusion from the Medicare and Medicaid programs or
any other third party payor program. With respect to payors, Company,
Shareholders and Company's licensed professional employees has not (a)
knowingly and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Company or Shareholders in this Agreement, and no Exhibit or certificate
issued or executed by, or information furnished by, officers or directors of
Company or any Shareholder and furnished or to be furnished to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained
<PAGE>
therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Company has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No
officer, employee, director or stockholder of Company, or their respective
spouses, children or affiliates, owns directly or indirectly, on an
individual or joint basis, any interest in, has a compensation or other
financial arrangement with, or serves as an officer or director of, any
customer or supplier or competitor of Company or any organization that has a
material contract or arrangement with Company.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Company's services which
accounted for more than 10% of revenues of Company in the preceding fiscal
year. Company has good relations with all such payors and other material
payors of Company and none of such payors has notified Company that it
intends to discontinue its relationship with Company or to deny any claims
submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Company and Shareholders as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation
duly organized and existing and in good standing under the laws of the State
of Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building
or other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would
not have a material adverse effect, there are no proceedings pending or, to
the
<PAGE>
knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material
adverse effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has knowledge to the continued operation of its business or the use
of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating to
taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation
for any finder's, broker's or similar fees in connection with the
transactions contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the reorganization contemplated
hereby will be as of the Closing Date duly and validly authorized by all
necessary corporate action on the part of Pentegra. The Pentegra Common Stock
to be issued in connection with the reorganization contemplated hereby, when
issued in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Company or any
Shareholder pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, agree that between the
date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders
shall use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Company
and Shareholders agree to complete the Exhibits hereto to be provided by them
in form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the
Business and use the Assets in the ordinary course. Company and Shareholders
shall not enter into any lease, contract, indebtedness, commitment, purchase
or sale or acquire or dispose of any capital asset relating to the Business
or the Assets except in the ordinary course of business. Company and
Shareholders shall use their best efforts to preserve the Business and Assets
intact and shall not take any action that would have an adverse effect on the
Business or Assets. Company and Shareholders shall use their best efforts to
preserve intact the relationships with payors, customers, suppliers, patients
and others having significant business relations with
<PAGE>
Company. Company and Shareholders shall collect its receivables and pay its
trade payables in the ordinary course of business. Company and Shareholdes
shall not introduce any new method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra
and its authorized representatives access to, and make available for
inspection, all of the assets and business of Company, the Business and the
Assets, including employees, customers and suppliers and permit Pentegra and
its authorized representatives to inspect and make copies of all documents,
records and information with respect to the business or assets of Company,
the Business or the Assets as Pentegra or its representatives may request.
Company and Shareholders shall promptly notify Pentegra in writing of (a) any
notice or communication relating to a default or event that, with notice or
lapse of time or both, could become a default, under any contract, commitment
or obligation to which Company is a party or relating to the Business or the
Assets, and (b) any adverse change in Company's or the Business' financial
condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and
Shareholders shall use their best efforts to secure all necessary approvals
and consents of third parties to the consummation of the transactions
contemplated hereby, including consents described on EXHIBIT 2.4. Company and
Shareholders shall use their best efforts to obtain all licenses, permits,
approvals or other authorizations required under any law, rule, regulation,
or otherwise to provide the services of the Practice contemplated by the
Service Agreement and to conduct the intended business of the Practice and
operate the Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance
with the provisions hereof, Company and Shareholders shall not, and shall use
its best efforts to cause Company's employees, agents and representatives not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or
the making or implementation of any proposal or offer, including without
limitation, any proposal or offer to any Shareholder, with respect to a
merger, acquisition, consolidation or similar transaction involving, or the
purchase of all or any significant portion of the assets or any equity
securities of Company or engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person relating to such proposal or offer, and Company and Shareholders will
immediately cease any such activities, discussions or negotiations heretofore
conducted with respect to any of the foregoing. Company and Shareholders
shall immediately notify Pentegra if any such inquiries or proposals are
received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants
and agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Company or any entity might have any liability whatsoever
arising from any insurance, pension plan, employment tax or similar liability
of Company to any employee or other person or entity (including, without
limitation, any Company Plan and any liability under employment contracts
with Company) allocable to services performed prior to the Closing Date.
Company and Shareholders acknowledge that the purpose and intent of this
covenant is to assure that Pentegra shall have no unfunded liability
whatsoever at any time after the Closing Date with respect to any of
Company's employees or similar persons or entities, including, without
limitation, any Company Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Company shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash
compensation of any Shareholder (other than in the ordinary course of
business) or other employee or an independent contractor of Company, adopt,
amend or terminate any compensation plan, employment agreement, independent
contractor agreement, employee policies and procedures or employee benefit
plan, take any action that could deplete the assets of any employee benefit,
or fail to pay any premium or contribution due or file any report with
respect to any employee benefit plan, or take any other actions with respect
to its employees or employee matters which might have an adverse effect upon
Company, its business, assets or prospects.
<PAGE>
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or
dividend of any kind will be declared or paid by Company, nor will any
repurchase of any of Company's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders
shall use their best efforts to take, or cause to be taken, all actions
necessary to effect the reorganization contemplated hereby under applicable
law.
4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not
change in any material respect the tax or financial accounting methods or
practices followed by Company (including any material change in any
assumption underlying, or any method of calculating, any bad debt,
contingency or other reserve), except as may be required by law or generally
accepted accounting principles. Company and Shareholders will duly,
accurately and timely (without regard to any extensions of time) file all
returns, information statements and other documents relating to taxes of
Company required to be filed by it, and pay all taxes required to be paid by
it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Company hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Company and Shareholders covenant and agree that all of the
creditors with respect to the Business and the Assets will be paid in full by
Company prior to the Closing Date, except to extent that any liability to
such creditors is assumed by Pentegra pursuant to this Agreement. If required
by Pentegra, Company and Shareholders shall furnish Pentegra with proof of
payment of all creditors with respect to the Business and the Assets.
Notwithstanding the foregoing, Company and Shareholders may dispute the
validity or amount of any such creditor's claim without being deemed to be in
violation of this SECTION 4.11, provided that such dispute is in good faith
and does not unreasonably delay the resolution of the claim and provided,
further that Company and Shareholders agree to indemnify and bond Pentegra
for such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Company leases any of its premises from any Shareholder
or other affiliate of Company or any shareholder of Company, Pentegra shall
have entered into a building lease (the "Building Lease") with the owner of
such premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, (i) a five year
initial term plus three five-year renewal options, (ii) a lease rate equal to
the fair market value lease rate, as agreed to by Pentegra, and (iii) such
other provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate
with all requests made by Pentegra for the purpose of allowing Pentegra to
hire those non-dentist employees of Company designated by Pentegra, such
employment to be effective as of the Closing Date. Notwithstanding the above,
Company and Shareholders shall remain liable under any Company Plans for any
claims incurred by any employees or their spouses or dependents, and for all
compensation, bonuses, benefits and other such items and other liabilities
related to Company's employees incurred by Company prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all
employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall
be treated as "leased employees" (as defined in Code Section 414(n)) of
Company and shall be treated as Clinic employees for purposes of eligibility
and participation in Company Plans.
4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective
as of the Closing Date.
4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a
limited liability company,
<PAGE>
partnership or other legal entity (the "Practice") approved by Pentegra for
the purpose of practicing dentistry and entering into the Service Agreement.
The Practice shall be duly organized, in existing and in good standing under
the laws of the State in which the practice of dentistry is conducted by the
Shareholders and the Practice. The Practice shall have all necessary power to
own all of its assets and to carry on its business as such business is now
being conducted. The Shareholders shall be the sole
member/shareholder/partner of the Practice and own all such interests free of
all security interests, claims, encumbrances and liens. Each interest in the
Practice shall be legally and validly issued and fully paid and
nonassessable. There shall be no outstanding (a) bonds, debentures, notes or
other obligations the holders of which have the right to vote with the
members/partners/shareholders of the Practice on any matter, (b) securities
of the Practice convertible into equity interests in the Practice, or (c)
commitments, options, rights or warrants to issue any such equity interests
in the Practice, to issue securities of the Practice convertible into such
equity interests, or to redeem any securities of the Practice. No interests
of the Practice shall have been issued or disposed of in violation of the
preemptive rights, rights of first refusal or similar rights of any of the
Practice's members/partners/shareholders. The Practice shall quality to do
business as a foreign entity in any other state or jurisdiction by reason of
its business, properties or activities in or relating to such other state or
jurisdiction. The Company shall have transferred the Excluded Assets set
forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to
assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for
equity interest in the Practice, and the Company shall have distributed such
equity interests in the Practice to the Shareholders.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation,
Bylaws/Regulations and minutes of the Practice and all amendments thereto of
the Practice shall have been delivered to Pentegra and shall be in form and
substance satisfactory to Pentegra. The minute books of the Practice shall
contain all accurate minutes of the meetings of and consents to actions taken
without meetings of the members\managers/partners/board of directors of the
Practice since its formation. The books of account of the Practice shall have
been kept accurately in the ordinary course of business and the revenues,
expenses, assets and liabilities of the Practice shall have been properly
recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements
and other documents to be executed and delivered by it pursuant to this
Agreement, including without limitation, the Service Agreement and each
Employment Agreement or to be executed and delivered on the Closing Date, and
has taken all action required by law, its Organization/Partnership
Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to
authorize the execution, delivery and performance of such documents. The
Service Agreement, the Employment Agreement and the other agreements
contemplated hereby shall have been duly executed and delivered by the
Practice and constitute or will constitute the legal, valid and binding
obligations of the Practice enforceable against the Practice in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of the
Service Agreement, the Employment Agreements and the other agreements
contemplated hereby will not violate any provision of the organizational
documents of the Practice or any provisions of, or result in the acceleration
of, any obligation under any mortgage, lien, lease, agreement, rent,
instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any
material restrictions of any kind to which the Practice is subject, or result
in any lien or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws,
<PAGE>
regulations and licensing requirements and have filed with the proper
authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra
shall use its best efforts to secure all necessary approvals and consents of
third parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS.
Pentegra, Shareholders and Company agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall
cooperate to promptly prepare and file with the Securities Exchange
Commission ("SEC") the Registration Statement on Form S-1 (or other
appropriate Form) to be filed by Pentegra in connection with its Initial
Public Offering (including the prospectus constituting a part thereof, the
"Registration Statement"). Pentegra shall obtain all necessary state
securities laws or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement and the Company and Shareholders
shall furnish all information concerning Company and Shareholders as may be
reasonable requested in connection with any such action.
Company and Shareholder represent and warrant that none of the
information or documents supplied or to be supplied by it specifically for
inclusion in the Registration Statement, by exhibit or otherwise, will, at
the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act of 1933, 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, in
light of the circumstances under which they were made, not misleading.
Company and Shareholders shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.
Company and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by
Pentegra in connection with the preparation of the Registration Statement and
each amendment or supplement thereto, or any other statement, filing, notice
or application made by or on behalf of each such party or any of its
subsidiaries to any governmental entity in connection with the transactions
contemplated by the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Company and
<PAGE>
Shareholders contained herein shall have been true and correct in all
respects when initially made and shall be true and correct in all respects as
of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Company and Shareholders prior
to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Company shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Company, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service
Agreement"), in substantially the form attached hereto as EXHIBIT 7.7,
pursuant to which Pentegra will provide management services to the Practice.
Each Shareholder shall have executed and delivered a Guaranty Agreement in
substantially the form attached as EXHIBIT 4.10 of the Service Agreement
pursuant to which Shareholder shall, among other things, guaranty the
obligations of the Practice under the Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and
caused each shareholder of Company that has an existing employment agreement
with Company to have terminated his or her employment agreement with Company
and shall have executed an employment agreement ("Employment Agreement") with
the Practice in form and substance attached hereto as EXHIBIT 7.8 and
otherwise satisfactory to Company and Pentegra.
7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have
obtained all necessary government and other third-party approvals and
consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables
or payables between Company and its shareholders or affiliates and Company
shall not have any liabilities, including indebtedness, guaranties and
capital leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Company and Shareholders shall have named Pentegra as
an additional insured on their liability insurance program in accordance with
SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Company since the Balance Sheet Date.
<PAGE>
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Company and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Pentegra contained herein shall have been true and correct in
all respects when initially made and shall be true and correct in all
respects as of the Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Company shall have received all documents,
duly executed in form satisfactory to Company and its counsel, referred to in
SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days
after requested by Pentegra, Company and Shareholders shall deliver to
Pentegra the following, all of which shall be in a form satisfactory to
counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel
for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or
letter agreement in form and substance mutually acceptable to the parties
hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
<PAGE>
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of Company
authorizing the execution, delivery and performance of this Agreement, the
Service Agreement, the Employment Agreements and all related documents and
agreements each certified by the Secretary as being true and correct copies
of the original thereof;
(d) executed merger certificate and/or plan as required by
applicable state law;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra and the original stock certificates
together with blank stock powers representing the outstanding shares of
Company common stock;
(f) certificates of the Shareholders and a duly authorized officer
of Company dated as of the Closing Date, (i) as to the truth and correctness
of the representations and warranties of Company and Shareholder contained
herein; (ii) as to the performance of and compliance by Company and
Shareholder with all covenants contained herein; and (iii) certifying that
all conditions precedent of Company and Shareholders to the Closing have been
satisfied;
(g) a certificate of the Secretary of Company certifying as to the
incumbency of the directors and officers of Company and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Company;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Company and any state of required
foreign qualification of Company establishing that Company is in existence
and is in good standing to transact business in its state of incorporation;
(i) an opinion of counsel to Company and Shareholder opining as to
the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Company, the enforceability of this Agreement and the other agreements and
documents to be executed in connection herewith, and other matters reasonably
requested by Pentegra;
(j) non-foreign affidavits executed by Company;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Company and Shareholders, the following, all of which shall
be in a form satisfactory to counsel to Company and Shareholders and shall be
held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending
Closing, pursuant to an escrow agreement or letter agreement in form and
substance mutually acceptable to the parties hereto:
(a) the Merger Consideration;
<PAGE>
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Company;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Company;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Company to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement
or in any Exhibit attached hereto, any agreement executed pursuant hereto,
and any certificate executed and delivered by any party pursuant to the terms
of this Agreement, shall constitute representations and warranties of Company
and Shareholders, jointly and severally, or of Pentegra, as the case may be.
All such representations and warranties, and all representations and
warranties expressly labeled as such in this Agreement shall survive the date
of this Agreement and the Closing Date for a period of five (5) years
following the Closing Date, except that (i) the representations and
warranties with respect to environmental and medical waste laws and health
care laws and matters shall survive for a period of fifteen (15) years and
tax representations shall survive until one year after the expiration of the
applicable statute of limitations. Each party covenants with the other
parties not to make any claim with respect to such representations and
warranties, against any party after the date on which such survival period
shall terminate. No party shall be entitled to claim indemnity from any
other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has
timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the
case may be. Each party hereby releases, acquits and discharges the other
party from any and all claims and demands, actions and causes of action,
damages, costs, expenses and rights of setoff with respect to which the
notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely
provided.
<PAGE>
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS
SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"),
SHALL INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES
(EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF
THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN
"INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES,
LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING,
BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH
APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND,
PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS
SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"),
JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES,
OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE
EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND
AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS,
COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE
FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON
OF OR RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO
<PAGE>
BE FURNISHED BY INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR
AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL
LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION
ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS
RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER
THE CLOSING DATE,
(E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY
RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A
RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH
THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS
SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS
SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE
REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO
MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after
Indemnified Person receives
<PAGE>
written notice of the commencement of any action or other proceeding in
respect of which indemnification or reimbursement may be sought hereunder, or
within such lesser time as may be provided by law for the defense of such
action or proceeding, such Indemnified Person shall notify Indemnitor
thereof. If any such action or other proceeding shall be brought against any
Indemnified Person, Indemnitor shall, upon written notice given within a
reasonable time following receipt by Indemnitor of such notice from
Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Company or any Shareholder giving
rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra
shall be entitled to offset the amount of damages incurred by it as a result
of such breach of warranty, representation, covenant or agreement against any
amounts payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Company
or any Shareholder contained in this Agreement or in any certificate or other
document executed and delivered by Company or any Shareholder pursuant to
this Agreement is or becomes untrue or breached in any material respect or if
Company or any Shareholder fails to comply in any material respect with any
covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
(c) at any time by Company or any Shareholder if any representation or
warranty of Pentegra contained in this Agreement or in any certificate or
other document executed and delivered by Pentegra pursuant to this Agreement
is or becomes untrue or breached in any material respect or if Pentegra fails
to comply in any material respect with any covenant or agreement contained
herein and such misrepresentation, noncompliance or breach is not cured,
waived or eliminated within twenty (20) days after receipt of written notice
thereof;
(d) by Pentegra, Shareholders or Company if the transaction contemplated
hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Company, that such termination is
desirable and in the best interests of Pentegra.
<PAGE>
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares
of Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer
shall be treated as effective for any purpose or (b) engage in any
transaction, whether or not with respect to any shares of Pentegra Common
Stock or any interest therein, the intent or effect of which is to reduce the
risk of owning shares of Pentegra Common Stock. The certificates evidencing
the Pentegra Common Stock delivered to Company pursuant to the terms hereof
will bear a legend substantially in the form set forth below and containing
such other information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that
the shares of Pentegra Common Stock to be delivered to Company pursuant to
this Agreement have not been and will not be registered under the Securities
Act of 1933 and may not be resold without compliance with the Securities Act
of 1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to
this Agreement is being acquired solely for its own account, for investment
purposes only and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution. Each
Shareholder covenants, warrants and represents that none of the shares of
Pentegra Common Stock issued to it will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the Securities Act, as
amended, and the rules and regulations of the Securities Exchange Commission
and applicable state securities laws and regulations. All certificates
evidencing shares of Pentegra Common Stock shall bear the following legend in
addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock
shall bear any legend required by the securities or blue sky laws of any
state where Company resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the
economic risk of an investment in Pentegra Common Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and
have such knowledge and experience in financial and business matters that
they are capable of evaluating the merits and risks of the proposed
investment and therefore have the capacity to protect their own interests in
connection with the acquisition of the Pentegra Common Stock. Shareholders
and their representatives have had an adequate opportunity to ask questions
and receive answers from the officers of Pentegra concerning any and all
matters relating to the background and experience of the officers and
directors of Pentegra, the plans for the operations of the business of
Pentegra, and any plans for additional
<PAGE>
acquisitions and the like. Shareholders and their representatives have asked
any and all questions in the nature described in the preceding sentence and
all questions have been answered to their satisfaction. Shareholders are
"accredited investors" as defined in Regulation D of the Securities Act of
1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Company and Shareholders agree that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally
through no fault of Company or Shareholders, (ii) disclosure is required by
law or the order of any governmental authority under color of law, provided,
that prior to disclosing any information pursuant to this clause (ii),
Company and Shareholders shall, if possible, give prior written notice
thereof to the other parties hereto, and provide such other parties hereto
with the opportunity to contest such disclosure, (iii) Company and
Shareholders reasonably believe that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party, or
(iv) Company and Shareholders are the sole and exclusive owner of such
confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Company or Shareholders of the provisions of this SECTION 13, Pentegra shall
be entitled to an injunction restraining Company and Shareholders from
disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Pentegra from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. The obligations of the parties under this SECTION 13 shall
survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions
contemplated by this Agreement will qualify as a reorganization within the
meaning of Section 368(a) of the Code. The tax returns (and schedules
thereto) of Shareholders, Company and Pentegra shall be filed in a manner
consistent with such intention and Shareholders and Pentegra shall each
provide the other with such tax information, reports, returns or schedules as
may be reasonably required to assist the other in so reporting the
transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
<PAGE>
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Company and Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any
further acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Company or any Shareholder for services
rendered in connection with negotiating and closing the transactions
contemplated by this Agreement or the documents to be executed in connection
herewith, whether or not such costs or expenses are incurred before or after
the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Company.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF
Company AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
<PAGE>
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one and the
same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Company, be relieved from its obligations
to Company under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Company, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Company and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Company or may demand from Company, and Company agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Companys or Shareholders (hereinafter referred to as a "Party"), whether made
before or after the institution of any legal proceeding, any dispute among
the parties hereto in any way arising out of, related to, or in connection
with this Agreement (hereinafter a "Dispute"), shall be resolved by binding
arbitration in accordance with the terms of this Section (hereinafter the
"Arbitration Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules
<PAGE>
or statutes, then the terms of this Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or foreclosing upon any
personal property in which there has been granted a security interest or lien
by a Party in the Documents. In Disputes involving indebtedness or other
monetary obligations, each Party agrees that the other Party may proceed
against all liable persons, jointly and severally against one or more of
them, without impairing rights against other liable persons. Nor shall a
Party be required to join the principal obligor or any other liable persons
(e.g., sureties or guarantors) in any proceeding against a particular person.
A Party may release or settle with one or more liable persons as the Party
deems fit without releasing or impairing rights to proceed against any
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoeniz,
Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or by
applicable law or regulation.
<PAGE>
14.16 SEVERABILITY. If any provision of this Agreement shall be found
to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
RICHARD N. SMITH, DMD, P.C.
By: /s/ Richard N. Smith, DMD
----------------------------------
Richard N. Smith, DMD, Co-Trustee
By: /s/ Mary E. Smith
----------------------------------
Mary E. Smith, Co-Trustee
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
----------------------------------
Its: Senior Vice President
----------------------------------
THE PARADISE TRUST
/s/ Richard N. Smith, DMD
-------------------------------------
Richard N. Smith, DMD , Co-Trustee
/s/ Mary E. Smith
-------------------------------------
Mary E. Smith, Co-Trustee
/s/ Richard N. Smith, DMD
-------------------------------------
Richard N. Smith, DMD
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Merger Consideration
A Target Companies
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment
Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
4.16 Excluded Assets and Excluded Liabilities
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
and
JOHN N. STELLPFLUG, D.D.S.
<PAGE>
TABLE OF CONTENTS
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Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . 3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . . 3
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . . 3
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . . 7
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . . 8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . . 8
3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4. COVENANTS OF DENTIST.
4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 9
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4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . 9
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . . 9
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . . 10
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 10
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . . 10
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . . 11
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . 11
Section 6. COVENANTS OF PENTEGRA AND DENTIST
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 12
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . . 12
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . 12
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8. DENTIST'S CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 13
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9. CLOSING DELIVERIES
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9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . . . . . . . 16
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . . 19
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . 21
14.12 NO RULE OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.13 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.14 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.15 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.16 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed
as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra") and JOHN N. STELLPFLUG, D.D.S.
("Dentist").
WITNESSETH:
WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires
to receive from Dentist, certain assets of Dentist;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Dentist, the "Target Companies");
WHEREAS, it is intended for Federal income tax purposes that the
transfers contemplated by this Agreement, the Other Agreements and Pentegra's
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an
exchange within the meaning of Section 351 of the Internal Revenue Code of
1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and
conditions contained herein, on the Closing Date, Dentist shall convey,
transfer, deliver and assign to Pentegra or any affiliate of Pentegra
designated by Pentegra all of Dentist's right, title and interest in and to
those certain assets described on EXHIBIT 1.1 attached hereto (individually,
"Asset", and collectively "Assets"), free and clear of all obligations,
security interests, claims, liens and encumbrances, except as specifically
assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof.
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1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and contributed hereunder, and Dentist shall retain all of its
right, title and interest in and to, the assets not specifically transferred
hereunder, including without limitation, the assets described on EXHIBIT 1.2
(the "Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Dentist
contained herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Dentist the consideration specified
in ANNEX I attached hereto (the "Acquisition Consideration"); and
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b)
attached hereto to the extent that such obligations, commitments, liabilities
and indebtedness are current and not otherwise in default (the "Assumed
Liabilities"). Notwithstanding any contrary provision contained herein,
Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i)
any liability, commitment or obligation or trade payable or indebtedness not
specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on
EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default
under such contracts, leases, commitments or obligations which occurred on or
before the Closing Date; (iii) any liability for any employee benefits
payable to employees of Dentist, including, but not limited to, liabilities
arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any
liability based upon or arising out of a violation of any antitrust or
similar restraint-of-trade laws by Dentist, including, without limiting the
generality of the foregoing, any such antitrust liability which may arise in
connection with agreements, contracts, commitments or orders for the sale of
goods or provision of services by Dentist reflected on the books of Dentist
at or prior to the Closing Date; (v) any liability based upon or arising out
of any tortious or wrongful actions of Dentist, any licensed professional
employee or independent contractor of Dentist, (vi) any liability for the
payment of any taxes of Dentist, including without limitation, sales, use and
other transfer taxes and income taxes arising from or by reason of the
transactions contemplated by this Agreement; (vii) any indebtedness secured
by deeds of trust or mortgages on real property; nor (viii) any liability
incurred or to be incurred pursuant to any malpractice or other suits or
actions pending against Dentist.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement, the
Dentist shall execute and deliver all such deeds, bills of sale, assignments
and assurances and take and do all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under the Assets in Pentegra or otherwise to carry
out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
Dentist hereby represents and warrants to Pentegra as follows:
2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the
State of Wisconsin. Dentist does not have any assets, employees or offices
in any state other than the state set forth in the first sentence of this
SECTION 2.1.
2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into
and perform this Agreement and the other agreements to be executed and
delivered in connection herewith. This Agreement
<PAGE>
and all agreements and documents executed and delivered in connection
herewith have been, or will be as of the Closing Date, duly executed and
delivered by Dentist and constitute or will constitute the legal, valid and
binding obligations of Dentist in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of
consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, result in the acceleration of, any obligation
under any mortgage, lien, lease, agreement, rent, instrument, order,
arbitration award, judgment or decree to which Dentist is a party or by which
Dentist is bound, or violate any material restrictions of any kind to which
Dentist is subject, or result in any lien or encumbrance on any of Dentist's
assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to
the knowledge of Dentist, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Dentist.
2.5 [INTENTIONALLY DELETED].
2.6 [INTENTIONALLY DELETED].
2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any
related unaudited statements of income, retained earnings, schedule of
accounts receivable, accounts payable and accrued liabilities, and cash flows
for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Dentist as of
the dates and for the periods indicated and reflect all fixed and contingent
liabilities of Dentist.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Dentist leases, as lessor or lessee, real or personal
property used in operating the Business, related to the Assets or otherwise.
All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance
with their respective terms, and there is not under any such lease any
existing default by Dentist, as lessor or lessee, or any condition or event
of which Dentist has knowledge which with notice or lapse of time, or both,
would constitute a default, in respect of which Dentist has not taken
adequate steps to cure such default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Dentist has no knowledge of any
latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and
marketable title to all
<PAGE>
of the Assets, free and clear of any liens, claims, charges, exceptions or
encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10
attached hereto. Dentist shall cause all encumbrances set forth on EXHIBIT
2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be
released or terminated prior to the Closing Date and evidence of such
releases of liens and claims shall be provided to Pentegra on the Closing
Date and the Assets shall not be used to satisfy such liens, claims or
encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Dentist, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Dentist has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Dentist, including the names of any entities from whom Dentist previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Dentist in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Dentist has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the most recent payroll report of Dentist, showing
all current employees of Dentist and their current levels of compensation,
(b) promised increases in compensation of employees of Dentist that have not
yet been effected, (c) oral or written employment agreements, consulting
agreements or independent contractor agreements (and all amendments thereto)
to which Dentist is a party, copies of which have been delivered to Pentegra,
and (d) all employee manuals, materials, policies, procedures and
work-related rules, copies of which have been delivered to Pentegra. Dentist
is in compliance with all applicable laws, rules, regulations and ordinances
respecting employment and employment practices. Dentist has not engaged in
any unfair labor practice. There are no unfair labor practices charges or
complaints pending or threatened against Dentist, and Dentist has never been
a party to any agreement with any union, labor organization or collective
bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the
Assets is subject to any pending, nor does Dentist have knowledge of any
threatened, litigation, governmental investigation, condemnation or other
proceeding against or relating to or affecting Dentist, the Business, the
Assets or the transactions contemplated by this Agreement, and, to the
knowledge of Dentist, no basis for any such action exists, nor is there any
legal impediment of which Dentist has knowledge to the continued operation of
its business or the use of the Assets in the ordinary course, subject to
consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Dentist ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted or may be made
by any party thereto.
<PAGE>
Except as indicated on such Exhibits, there is not under any such Contract
any existing default by Dentist, or any condition or event of which Dentist
has knowledge which with notice or lapse of time, or both, would constitute a
default. Dentist has no knowledge of any default by any other party to such
Contracts. Dentist has not received notice of the intention of any party to
any Contract to cancel or terminate any Contract and have no reason to
believe that any amendment or change to any Contract is contemplated by any
party thereto. Other than those contracts, obligations and commitments
listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist is not a party
to any material written or oral agreement contract, lease or arrangement,
including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
the Dentist, oral or written, that provide for prepayments or deferred
installment payments; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Dentist on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16,
Dentist has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(c) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
<PAGE>
(d) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(e) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Dentist since the Balance Sheet
Date;
(f) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(g) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(h) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(i) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(j) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(k) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties,
assets or business or the Business or the Assets, or experienced any other
material adverse change in its financial condition, assets, prospects,
liabilities or business; or
(l) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Dentist has not received any notice that any tax deficiency or
delinquency has been or may be asserted against Dentist. There are no
audits relating to taxes of Dentist pending or in process or, to the
knowledge of Dentist, threatened. Dentist is not currently the beneficiary of
any waiver of any statute of limitations in respect of taxes nor of any
extension of time within which to file any tax return or to pay any tax
assessment or deficiency. There are no liens or encumbrances relating to
taxes on or threatened against any of the assets of Dentist. Dentist has
withheld and paid all taxes required by law to have been withheld and paid by
it. Neither Dentist nor any predecessor of Dentist is or has been a party to
any tax allocation or sharing agreement or a member of an affiliated group of
corporations filing a consolidated Federal income tax return. Dentist has
delivered to Pentegra correct and complete copies of Dentist's three most
recently filed annual state, local and Federal income tax returns, together
with all examination reports and statements of deficiencies assessed against
or agreed to by Dentist during the three calendar year period preceding the
date of this Agreement. Dentist has neither made any payments, is obligated
to make any payments, or is a party to any agreement that under any
circumstance could obligate it to make any payments that will not be
deductible under Code section 280G.
(b) Dentist does not intend to dispose of any of the shares of Pentegra
Common Stock to be received hereunder and is not a party to any plan,
arrangement or agreement for the disposition of such shares.
<PAGE>
Nothing contained herein shall prohibit Dentist from selling such shares of
Pentegra Common Stock after the designated holding period and in accordance
with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated
by this Agreement which may be now or hereafter asserted against Pentegra,
Dentist resulting from any action taken by Dentist or their respective agents
or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Dentist did not have, as of the Balance Sheet
Date, and has not incurred since that date and will not have incurred as of
the Closing Date, any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
other than those incurred in the ordinary course of business or as set forth
on EXHIBIT 2.16. Dentist does not know, or have reasonable grounds to know,
of any basis for the assertion against Dentist as of the Balance Sheet Date,
of any claim or liability of any nature in any amount not fully reflected or
reserved against on the Balance Sheet, or of any claim or liability of any
nature arising since that date other than those incurred in the ordinary
course of business or contemplated by this Agreement. All indebtedness of
Dentist (including without limitation, indebtedness for borrowed money,
guaranties and capital lease obligations) is described on EXHIBIT 2.19
attached hereto.
2.20 INSURANCE POLICIES. Dentist and each licensed professional of
Dentist carries property, liability, malpractice, workers' compensation and
such other types of insurance as is customary in the industry. Valid and
enforceable policies in such amounts are outstanding and duly in force and
will remain duly in force through the Closing Date. All such policies are
described in EXHIBIT 2.20 attached hereto and true and correct copies have
been delivered to Pentegra. Dentist has not received notice or other
communication from the issuer of any such insurance policy cancelling or
amending such policy or threatening to do so. Neither Dentist nor any
licensed professional employee of Dentist has any outstanding claims,
settlements or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Dentist has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist
Plan," and collectively "Dentist Plans") have been operated and administered
in all material respects in accordance with all applicable laws, rules and
regulations, including without limitation, ERISA, the Internal Revenue Code
of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment
Act of 1967, as amended, and the related rules and regulations adopted by
those Federal agencies responsible for the administration of such laws. No
act or failure to act by Dentist has resulted in a "prohibited transaction"
(as defined in ERISA) with respect to the Dentist Plans. No "reportable
event" (as defined in ERISA) has occurred with respect to any of the Dentist
Plans. Dentist has not previously made, is not currently making, and is not
obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Dentist Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at least equal to the
value of plan liabilities or (ii) the value of plan liabilities in excess of
plan assets is disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or
<PAGE>
otherwise), operations, assets, liabilities, business or prospects of
Dentist, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed
professional employees, and the conduct of the Business and use of the
Assets, have complied with all applicable laws, rules, regulations and
licensing requirements, including, without limitation, the Federal
Environmental Protection Act, the Occupational Safety and Health Act, the
Americans with Disabilities Act and any environmental laws and medical waste
laws, and there exist no violations by Dentist or any licensed professional
employee of Dentist of any Federal, state or local law or regulation.
Dentist has not received any notice of a violation of any Federal, state and
local laws, regulations and ordinances relating to the operations of the
Business and Assets and no notice of any pending inspection or violation of
any such law, regulation or ordinance has been received by Dentist.
2.24 THIRD PARTY PAYORS. Dentist and each licensed professional
employee or independent contractor of Dentist has timely filed all claims or
other reports required to be filed with respect to the purchase of services
by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are
no pending appeals, overpayment determinations, adjustments, challenges,
audit, litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Dentist and each
licensed professional employee of Dentist. Neither Dentist nor any licensed
professional employee of Dentist has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Dentist and Dentist's licensed professional employees has not (a) knowingly
and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist
in this Agreement, and no Exhibit or certificate issued or executed by, or
information furnished by Dentist or to be furnished by Dentist to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Dentist has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer
or employee or family member of Dentist, or their respective spouses,
children or affiliates, owns directly or indirectly, on an individual or
joint basis, any interest in, has a compensation or other financial
arrangement with, or serves as an officer or director of, any customer or
supplier or competitor of Dentist or any organization that has a material
contract or arrangement with Dentist.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Dentist's services which
accounted for more than 10% of revenues of Dentist in the preceding fiscal
year. Dentist has good relations with all such payors and other material
payors of Dentist and none of such payors has notified Dentist that it
intends to discontinue its relationship with Dentist or to deny
<PAGE>
any claims submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Dentist as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would
not have a material adverse effect, there are no proceedings pending or, to
the knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has knowledge to the continued operation of its business or the use
of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
<PAGE>
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Dentist pursuant
hereto, or in connection with the transactions contemplated hereby, contains
or will contain any untrue statement of a material fact, or omits or will
omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
SECTION 4. COVENANTS OF DENTIST.
Dentist agrees that between the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and conditions. Dentist agrees to complete the
Exhibits hereto to be provided by him in form and substance satisfactory to
Pentegra.
4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the
Assets in the ordinary course. Dentist shall not enter into any lease,
contract, indebtedness, commitment, purchase or sale or acquire or dispose of
any capital asset relating to the Business or the Assets except in the
ordinary course of business. Dentist shall use their best efforts to
preserve the Business and Assets intact and shall not take any action that
would have an adverse effect on the Business or Assets. Dentist shall use
their best efforts to preserve intact the relationships with payors,
customers, suppliers, patients and others having significant business
relations with Dentist. Dentist shall collect its receivables and pay its
trade payables in the ordinary course of business. Dentist shall not
introduce any new method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized
representatives access to, and make available for inspection, all of the
assets and business of Dentist, the Business and the Assets, including
employees, customers and suppliers and permit Pentegra and its authorized
representatives to inspect and make copies of all documents, records and
information with respect to the business or assets of Dentist, the Business
or the Assets as Pentegra or its representatives may request. Dentist shall
promptly notify Pentegra in writing of (a) any notice or communication
relating to a default or event that, with notice or lapse of time or both,
could become a default, under any contract, commitment or obligation to which
Dentist is a party or relating to the Business or the Assets, and (b) any
adverse change in Dentist's or the Business' financial condition or the
Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall
use his best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby,
including consents described on EXHIBIT 2.4. Dentist shall use his best
efforts to obtain all licenses, permits, approvals or other authorizations
required under any law, rule, regulation, or otherwise to
<PAGE>
provide the services of the Practice contemplated by the Service Agreement
and to conduct the intended business of the Practice and operate the Business
and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance
with the provisions hereof, Dentist shall not, and shall use its best efforts
to cause Dentist's employees, agents and representatives not to, initiate,
solicit or encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer, including without limitation, any
proposal or offer to the Dentist, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of Dentist or
engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to
such proposal or offer, and Dentist will immediately cease any such
activities, discussions or negotiations heretofore conducted with respect to
any of the foregoing. Dentist shall immediately notify Pentegra if any such
inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Dentist or any entity might have any liability whatsoever
arising from any insurance, pension plan, employment tax or similar
liability of Dentist to any employee or other person or entity (including,
without limitation, any Dentist Plan and any liability under employment
contracts with Dentist) allocable to services performed prior to the Closing
Date. Dentist acknowledges that the purpose and intent of this covenant is
to assure that Pentegra shall have no liability whatsoever at any time after
the Closing Date with respect to any of Dentist's employees or similar
persons or entities, including, without limitation, any Dentist Plan for the
period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash
compensation of the Dentist (other than in the ordinary course of business)
or other employee or an independent contractor of Dentist, adopt, amend or
terminate any compensation plan, employment agreement, independent contractor
agreement, employee policies and procedures or employee benefit plan, take
any action that could deplete the assets of any employee benefit, or fail to
pay any premium or contribution due or file any report with respect to any
employee benefit plan, or take any other actions with respect to its
employees or employee matters which might have an adverse effect upon
Dentist, its business, assets or prospects.
4.8 [INTENTIONALLY OMITTED].
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best
efforts to take, or cause to be taken, all actions necessary to effect the
acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material
respect the tax or financial accounting methods or practices followed by
Dentist (including any material change in any assumption underlying, or any
method of calculating, any bad debt, contingency or other reserve), except as
may be required by law or generally accepted accounting principles. Dentist
will duly, accurately and timely (without regard to any extensions of time)
file all returns, information statements and other documents relating to
taxes of Dentist required to be filed by it, and pay all taxes required to be
paid by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby
waive any compliance with the applicable state Bulk Transfers Act, if any.
Dentist covenants and agrees that all of the creditors with respect to the
Business and the Assets will be paid in full by Dentist prior to the Closing
Date, except to extent that any liability to such creditors is assumed by
Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall
furnish Pentegra with proof of payment of all creditors with respect to the
Business and
<PAGE>
the Assets. Notwithstanding the foregoing, Dentist may dispute the validity
or amount of any such creditor's claim without being deemed to be in
violation of this SECTION 4.11, provided that such dispute is in good faith
and does not unreasonably delay the resolution of the claim and provided,
further that Dentist agrees to indemnify and bond Pentegra for such amounts
as is satisfactory to Pentegra.
4.12 LEASE. If Dentist leases any of its premises from the Dentist or
other affiliate of Dentist, Pentegra shall have entered into a building lease
(the "Building Lease") with the owner of such premises on terms and
conditions satisfactory to Pentegra, the terms and conditions of which shall
include, without limitation, (i) a five year initial term plus three
five-year renewal options, (ii) a lease rate equal to the fair market value
lease rate, as agreed to by Pentegra, and (iii) such other provisions to be
acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made
by Pentegra for the purpose of allowing Pentegra to hire those non-dental
employees of Dentist designated by Pentegra, such employment to be effective
as of the Closing Date. Notwithstanding the above, Dentist shall remain
liable under any Dentist Plans for any claims incurred by any employees or
their spouses or dependents, and for all compensation, bonuses, benefits and
other such items and other liabilities related to Dentist's employees
incurred by Dentist prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all
employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall
be treated as "leased employees" (as defined in Code Section 414(n)) of
Dentist and shall be treated as Clinic employees for purposes of eligibility
and participation in Dentist Plans.
4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective
as of the Closing Date.
4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited
liability company, partnership or other legal entity (the "Practice")
approved by Pentegra for the purpose of practicing dentistry and entering
into the Service Agreement. The Practice shall be duly organized, in
existence and in good standing under the laws of the State in which the
Dentist and the Practice are to practice dentistry. The Practice shall have
all necessary power to own all of its assets and to carry on its business as
such business is now being conducted. The Dentist shall be the sole
member/shareholder/partner of the Practice and own all such interests free of
all security interests, claims, encumbrances and liens. Each interest in the
Practice shall be legally and validly issued and fully paid and
nonassessable. There shall be no outstanding (a) bonds, debentures, notes or
other obligations the holders of which have the right to vote with the
members/partners/shareholders of the Practice on any matter, (b) securities
of the Practice convertible into equity interests in the Practice, or (c)
commitments, options, rights or warrants to issue any such equity interests
in the Practice, to issue securities of the Practice convertible into such
equity interests, or to redeem any securities of the Practice. No interests
of the Practice shall have been issued or disposed of in violation of the
preemptive rights, rights of first refusal or similar rights of any of the
Practice's members/partners/shareholders. The Practice shall quality to do
business as a foreign entity in any other state or jurisdiction by reason of
its business, properties or activities in or relating to such other state or
jurisdiction.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation,
Bylaws/Regulations and minutes of thePractice and all amendments thereto of
the Practice shall have been delivered to Pentegra and shall be in form and
substance satisfactory to Pentegra. The minute books of the Practice shall
contain all accurate minutes of the meetings of and consents to actions taken
without meetings of the members\managers/partners/board of directors of the
Practice since its formation. The books of account of the Practice shall
have been kept accurately in the ordinary course of business and the
revenues, expenses, assets and liabilities of the Practice shall have been
properly recorded in such books.
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4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements
and other documents to be executed and delivered by it pursuant to this
Agreement, including without limitation, the Service Agreement and each
Employment Agreement or to be executed and delivered on the Closing Date, and
has taken all action required by law, its Organization/Partnership
Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to
authorize the execution, delivery and performance of such documents. The
Service Agreement, the Employment Agreement and the other agreements
contemplated hereby shall have been duly executed and delivered by the
Practice and constitute or will constitute the legal, valid and binding
obligations of the Practice enforceable against the Practice in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of the
Service Agreement, the Employment Agreements and the other agreements
contemplated hereby will not violate any provision of the organizational
documents of the Practice or any provisions of, or result in the acceleration
of, any obligation under any mortgage, lien, lease, agreement, rent,
instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any
material restrictions of any kind to which the Practice is subject, or result
in any lien or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and has filed with
the proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND DENTIST.
Pentegra and Dentist agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to
promptly prepare and file with the Securities Exchange Commission ("SEC")
the Registration Statement on Form S-1 (or other appropriate Form) to be
filed by Pentegra in connection with its Initial Public Offering (including
the prospectus constituting a part thereof, the "Registration Statement").
Pentegra shall obtain all necessary state securities laws or "Blue Sky"
permits and approvals required to carry out the transactions contemplated by
this Agreement and the Dentist shall furnish all information concerning
Dentist as may be reasonably requested in connection with any such action.
<PAGE>
Dentist represents and warrants that none of the information or documents
supplied or to be supplied by it specifically for inclusion in the
Registration Statement, by exhibit or otherwise, will, at the time the
Registration Statement and each amendment or supplement thereto, if any,
becomes effective under the Securities Act of 1933, 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, in light of
the circumstances under which they were made, not misleading. Dentist shall
be entitled to review the Registration Statement and each amendment thereto,
if any, prior to the time each becomes effective under the Securities Act of
1933.
Dentist shall furnish Pentegra will all information concerning itself and
such other matters as may be reasonably requested by Pentegra in connection
with the preparation of the Registration Statement and each amendment or
supplement thereto, or any other statement, filing, notice or application
made by or on behalf of each such party or any of its subsidiaries to any
governmental entity in connection with the transactions contemplated by the
Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Dentist contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied
with all covenants and conditions required by this Agreement to be performed
and complied with by Dentist prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Dentist shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Dentist, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service
Agreement"), in substantially the form attached hereto as EXHIBIT 7.7,
pursuant to which Pentegra will provide management services to the Practice.
Dentist shall have executed and delivered a Guaranty Agreement in
substantially the form attached as EXHIBIT 4.10 of the Service Agreement
pursuant to which Dentist shall, among other things, guaranty the obligations
of the Practice under the Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her
employment agreement and executed an employment agreement ("Employment
Agreement") with the Practice in form and
<PAGE>
substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to
Dentist and Pentegra.
7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary
government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables
or payables between Dentist and its affiliates and Dentist shall not have any
liabilities, including indebtedness, guaranties and capital leases, that are
not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Dentist shall have named Pentegra as an additional
insured on its liability insurance program in accordance with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Dentist since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. DENTIST'S CONDITIONS PRECEDENT.
The obligations of Dentist hereunder are subject to fulfillment at or
prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pentegra contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly
executed in form satisfactory to Dentist and its counsel, referred to in
SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all
<PAGE>
state securities and "Blue Sky" permits necessary to consummate the
transactions contemplated hereby. The Pentegra Common Stock shall have been
approved for listing on Nasdaq or other exchange selected by Pentegra,
subject only to official notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF DENTIST. Within five business days after requested by
Pentegra, Dentist shall deliver to Pentegra the following, all of which shall
be in a form satisfactory to counsel to Pentegra and shall be held by Jackson
& Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant
to an escrow agreement or letter agreement in form and substance mutually
acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a bill of sale conveying the Assets to Pentegra;
(d) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(e) certificates of Dentist dated as of the Closing Date, (i) as to
the truth and correctness of the representations and warranties of Dentist
contained herein; (ii) as to the performance of and compliance by Dentist
with all covenants contained herein; and (iii) certifying that all conditions
precedent of Dentist to the Closing have been satisfied;
(f) an opinion of counsel to Dentist opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Dentist, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Pentegra;
(g) non-foreign affidavits executed by Dentist;
(h) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(i) an executed Registration Rights Agreement between Pentegra and
Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(j) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Dentist the following, all of which shall be in a form
satisfactory to counsel to Dentist and shall be held by Jackson & Walker,
L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an
escrow agreement or letter agreement in form and substance mutually
acceptable to the parties hereto:
(a) the Acquisition Consideration;
<PAGE>
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Dentist;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Dentist;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Dentist to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit attached hereto, any agreement executed pursuant hereto, and
any certificate executed and delivered by any party pursuant to the terms of
this Agreement, shall constitute representations and warranties of Dentist or
of Pentegra, as the case may be. All such representations and warranties,
and all representations and warranties expressly labeled as such in this
Agreement shall survive the date of this Agreement and the Closing Date for a
period of five (5) years following the Closing Date, except that (i) the
representations and warranties with respect to environmental and medical
waste laws and health care laws and matters shall survive for a period of
fifteen (15) years and tax representations shall survive until one year after
the expiration of the applicable statute of limitations. Each party
covenants with the other parties not to make any claim with respect to such
representations and warranties, against any party after the date on which
such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof,
unless such party has timely given the notice required in SECTION 10.2, 10.3
or 10.4 hereof, as the case may be. Each party hereby releases, acquits and
discharges the other party from any and all claims and demands, actions and
causes of action, damages, costs, expenses and rights of setoff with respect
to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable,
are not timely provided.
<PAGE>
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE
EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND
AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS,
DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION
10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS,
SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND
EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR
WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S
<PAGE>
MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE
ASSETS, AND
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR
AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING
HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF
OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY
THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR
AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION,
PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR
THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED
TO PENTEGRA OR ITS COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY
PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING
A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT
OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL
FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE
THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the
defense of such action or proceeding, such Indemnified Person shall notify
Indemnitor thereof. If any such action or other proceeding shall be brought
against any Indemnified Person, Indemnitor shall, upon written notice given
within a reasonable time following receipt by Indemnitor of such notice from
Indemnified Person, be entitled
<PAGE>
to assume the defense of such action or proceeding with counsel chosen by
Indemnitor and reasonably satisfactory to Indemnified Person; provided,
however, that any Indemnified Person may at its own expense retain separate
counsel to participate in such defense. Notwithstanding the foregoing,
Indemnified Person shall have the right to employ separate counsel at
Indemnitor's expense and to control its own defense of such action or
proceeding if, in the reasonable opinion of counsel to such Indemnified
Person, (a) there are or may be legal defenses available to such Indemnified
Person or to other Indemnified Persons that are different from or additional
to those available to Indemnitor and which could not be adequately advanced
by counsel chosen by Indemnitor, or (b) a conflict or potential conflict
exists between Indemnitor and such Indemnified Person that would make such
separate representation advisable; provided, however, that in no event shall
Indemnitor be required to pay fees and expenses hereunder for more than one
firm of attorneys of Indemnified Person in any jurisdiction in any one action
or proceeding or group of related actions or proceedings. Indemnitor shall
not, without the prior written consent of any Indemnified Person, settle or
compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding to which such Indemnified Person is a
party unless such settlement, compromise or consent includes an unconditional
release of such Indemnified Person from all liability arising or potentially
arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Dentist giving rise to
indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be
entitled to offset the amount of damages incurred by it as a result of such
breach of warranty, representation, covenant or agreement against any amounts
payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Dentist
contained in this Agreement or in any certificate or other document executed
and delivered by Dentist pursuant to this Agreement is or becomes untrue or
breached in any material respect or if Dentist fails to comply in any
material respect with any covenant or agreement contained herein, and any
such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
(c) at any time by Dentist if any representation or warranty of Pentegra
contained in this Agreement or in any certificate or other document executed
and delivered by Pentegra pursuant to this Agreement is or becomes untrue or
breached in any material respect or if Pentegra fails to comply in any
material respect with any covenant or agreement contained herein and such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra or Dentist if the transaction contemplated hereby shall
not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Dentist, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of
<PAGE>
(i) any shares of Pentegra Common Stock received by such party hereunder,
(ii) any interest (including without limitation, an option to buy or sell) in
any shares of Pentegra Common Stock, in whole or in part, and no such
attempted transfer shall be treated as effective for any purpose or (b)
engage in any transaction, whether or not with respect to any shares of
Pentegra Common Stock or any interest therein, the intent or effect of which
is to reduce the risk of owning shares of Pentegra Common Stock.
Notwithstanding the foregoing, Dentist shall be permitted to transfer the
shares of Pentegra Common Stock received by him hereunder to a member of his
immediate family provided that such family member agrees to be bound by the
limitations set forth in this SECTION 12.1. The certificates evidencing the
Pentegra Common Stock delivered to Dentist pursuant to the terms hereof will
bear a legend substantially in the form set forth below and containing such
other information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the
shares of Pentegra Common Stock to be delivered to Dentist pursuant to this
Agreement have not been and will not be registered under the Securities Act
of 1933 and may not be resold without compliance with the Securities Act of
1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this
Agreement is being acquired solely for its own account, for investment
purposes only and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution. Dentist
covenants, warrants and represents that none of the shares of Pentegra Common
Stock issued to it will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after full compliance with all of
the applicable provisions of the Securities Act, as amended, and the rules
and regulations of the Securities Exchange Commission and applicable state
securities laws and regulations. All certificates evidencing shares of
Pentegra Common Stock shall bear the following legend in addition to the
legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock
shall bear any legend required by the securities or blue sky laws of any
state where Dentist resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic
risk of an investment in Pentegra Common Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and has
such knowledge and experience in financial and business matters that they are
capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect its own interests in connection with
the acquisition of the Pentegra Common Stock. Dentist and its
representatives have had an adequate opportunity to ask questions and receive
answers from the officers of Pentegra concerning any and all matters relating
to the background and experience of the officers and directors of Pentegra,
the plans for the operations of the business of Pentegra, and any plans for
additional acquisitions and the like. Dentist and its representatives have
asked any and all questions in the nature described in the preceding sentence
and all questions have been answered to their satisfaction. Dentist is an
"accredited investors" as defined in Regulation D of the Securities Act of
1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes
and acknowledges that it
<PAGE>
had in the past, currently have, and in the future may possibly have, access
to certain confidential information of Pentegra that is valuable, special and
unique assets of Pentegra's businesses. Dentist agrees that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally
through no fault of Dentist, (ii) disclosure is required by law or the order
of any governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), Dentist shall, if
possible, give prior written notice thereof to the other parties hereto, and
provide such other parties hereto with the opportunity to contest such
disclosure, (iii) Dentist reasonably believes that such disclosure is
required in connection with the defense of a lawsuit against the disclosing
party, or (iv) Dentist is the sole and exclusive owner of such confidential
information as a result of the transactions contemplated hereunder or
otherwise. In the event of a breach or threatened breach by Dentist of the
provisions of this SECTION 13, Pentegra shall be entitled to an injunction
restraining Dentist from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting Pentegra from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages. The obligations of the parties under this
SECTION 13 shall survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement, together with the transactions contemplated by the Other
Agreement and the Initial Public Offering, will qualify as an exchange
meeting the requirements of Section 351 of the Code. The tax returns (and
schedules thereto) of Dentist and Pentegra shall be filed in a manner
consistent with such intention and Dentist and Pentegra shall each provide
the other with such tax information, reports, returns or schedules as may be
reasonably required to assist the other in so reporting the transactions
contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Dentist:
To address set forth on EXHIBIT 14.2
<PAGE>
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Dentist for services rendered in
connection with negotiating and closing the transactions contemplated by this
Agreement or the documents to be executed in connection herewith, whether or
not such costs or expenses are incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Dentist.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one
<PAGE>
and the same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Dentist, be relieved from its obligations
to Dentist under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Dentist, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Dentist (hereinafter referred to as a "Party"), whether made before or after
the institution of any legal proceeding, any dispute among the parties hereto
in any way arising out of, related to, or in connection with this Agreement
(hereinafter a "Dispute"), shall be resolved by binding arbitration in
accordance with the terms of this Section (hereinafter the "Arbitration
Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or
<PAGE>
foreclosing upon any personal property in which there has been granted a
security interest or lien by a Party in the Documents. In Disputes involving
indebtedness or other monetary obligations, each Party agrees that the other
Party may proceed against all liable persons, jointly and severally against
one or more of them, without impairing rights against other liable persons.
Nor shall a Party be required to join the principal obligor or any other
liable persons (e.g., sureties or guarantors) in any proceeding against a
particular person. A Party may release or settle with one or more liable
persons as the Party deems fit without releasing or impairing rights to
proceed against any persons not so released. All statutes of limitation that
would otherwise be applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoeniz,
Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or by
applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
<PAGE>
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
-----------------------------------------
Its: Senior VP
-----------------------------------------
/s/ John N. Stellpflug, D.D.S.
--------------------------------------------
John N. Stellpflug, D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
- ------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 [intentionally omitted]
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
AND
JACK STEPHENS, D.D.S.
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . .1
1.3 EXCLUDED ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . .2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .2
Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . 3
2.4 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . .3
2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . .3
2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . .3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . .3
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . .3
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . .4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . .6
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . .6
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . .7
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . .7
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . .8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . .8
3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . .8
3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . .8
Section 4. COVENANTS OF DENTIST.
4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . .9
<PAGE>
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . 9
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . 9
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . .10
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . .10
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . .10
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . .10
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . .10
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . . . . .10
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . .11
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . .11
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . .11
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . .11
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . .11
Section 6. COVENANTS OF PENTEGRA AND DENTIST
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . .12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . .12
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . .12
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . .12
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . .12
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . .12
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . .13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . .13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . .13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . .13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . .13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . .13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . .13
Section 8. DENTIST'S CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . .13
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . .13
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . .13
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . .14
Section 9. CLOSING DELIVERIES
<PAGE>
9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . . . . .14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . .15
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . .15
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . .16
10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . . . . .16
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . .17
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . .18
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . .19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . .19
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . .20
14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . .20
14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . .20
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . .21
14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . .21
14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . .21
14.12 NO RULE OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . .21
14.13 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . .21
14.14 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
14.15 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . .21
14.16 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
14.17 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as
of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware
corporation ("Pentegra") and Jack Stephens, D.D.S. ("Dentist").
WITNESSETH:
WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires
to receive from Dentist, certain assets of Dentist;
WHEREAS, Pentegra or its affiliated designee has entered into or intends to
enter into Agreements and Plans of Reorganization, Asset Contribution Agreements
and other acquisition agreements (collectively, the "Other Agreements") with
such persons or entities or the stockholders of such entities listed on EXHIBIT
A (together with Dentist, the "Target Companies");
WHEREAS, it is intended for Federal income tax purposes that the transfers
contemplated by this Agreement, the Other Agreements and Pentegra's initial
public offering ("Initial Public Offering") of shares of its common stock, par
value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange
within the meaning of Section 351 of the Internal Revenue Code of 1986, as
amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock
is consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions
contained herein, on the Closing Date, Dentist shall convey, transfer, deliver
and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all
of Dentist's right, title and interest in and to those certain assets described
on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively
"Assets"), free and clear of all obligations, security interests, claims, liens
and encumbrances, except as specifically assumed, or taken subject to, by
Pentegra pursuant to SECTION 1.3(b) hereof.
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and
<PAGE>
contributed hereunder, and Dentist shall retain all of its right, title and
interest in and to, the assets not specifically transferred hereunder,
including without limitation, the assets described on EXHIBIT 1.2 (the
"Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Dentist contained
herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Dentist the consideration specified in
ANNEX I attached hereto (the "Acquisition Consideration"); and
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b)
attached hereto to the extent that such obligations, commitments, liabilities
and indebtedness are current and not otherwise in default. (the "Assumed
Liabilities"). Notwithstanding any contrary provision contained herein,
Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i)
any liability, commitment or obligation or trade payable or indebtedness not
specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on
EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default
under such contracts, leases, commitments or obligations which occurred on or
before the Closing Date; (iii) any liability for any employee benefits
payable to employees of Dentist, including, but not limited to, liabilities
arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any
liability based upon or arising out of a violation of any antitrust or
similar restraint-of-trade laws by Dentist, including, without limiting the
generality of the foregoing, any such antitrust liability which may arise in
connection with agreements, contracts, commitments or orders for the sale of
goods or provision of services by Dentist reflected on the books of Dentist
at or prior to the Closing Date; (v) any liability based upon or arising out
of any tortious or wrongful actions of Dentist, any licensed professional
employee or independent contractor of Dentist, (vi) any liability for the
payment of any taxes of Dentist, including without limitation, sales, use and
other transfer taxes and income taxes arising from or by reason of the
transactions contemplated by this Agreement; (vii) any indebtedness secured
by deeds of trust or mortgages on real property; nor (viii) any liability
incurred or to be incurred pursuant to any malpractice or other suits or
actions pending against Dentist.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement, the
Dentist shall execute and deliver all such deeds, bills of sale, assignments and
assurances and take and do all such other actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right, title and interest
in, to and under the Assets in Pentegra or otherwise to carry out this
Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
Dentist hereby represents and warrants to Pentegra as follows:
2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the
State of Texas. Dentist does not have any assets, employees or offices in
any state other than the state set forth in the first sentence of this
SECTION 2.1.
2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into
and perform this
<PAGE>
Agreement and the other agreements to be executed and delivered in connection
herewith. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing
Date, duly executed and delivered by Dentist and constitute or will
constitute the legal, valid and binding obligations of Dentist in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of
this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and,
subject to the receipt of consents described on EXHIBIT 2.4, the consummation
of the actions contemplated hereby will not, result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Dentist is a party or
by which Dentist is bound, or violate any material restrictions of any kind
to which Dentist is subject, or result in any lien or encumbrance on any of
Dentist's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to
the knowledge of Dentist, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Dentist.
2.5 [INTENTIONALLY DELETED].
2.6 [INTENTIONALLY DELETED].
2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any
related unaudited statements of income, retained earnings, schedule of
accounts receivable, accounts payable and accrued liabilities, and cash flows
for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Dentist as of
the dates and for the periods indicated and reflect all fixed and contingent
liabilities of Dentist.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Dentist leases, as lessor or lessee, real or personal
property used in operating the Business, related to the Assets or otherwise.
All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance
with their respective terms, and there is not under any such lease any
existing default by Dentist, as lessor or lessee, or any condition or event
of which Dentist has knowledge which with notice or lapse of time, or both,
would constitute a default, in respect of which Dentist has not taken
adequate steps to cure such default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Dentist has no knowledge of any
latent defects therein.
<PAGE>
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances
set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to the Closing Date and evidence
of such releases of liens and claims shall be provided to Pentegra on the
Closing Date and the Assets shall not be used to satisfy such liens, claims
or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Dentist, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Dentist has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Dentist, including the names of any entities from whom Dentist previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Dentist in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Dentist has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the most recent payroll report of Dentist, showing
all current employees of Dentist and their current levels of compensation,
(b) promised increases in compensation of employees of Dentist that have not
yet been effected, (c) oral or written employment agreements, consulting
agreements or independent contractor agreements (and all amendments thereto)
to which Dentist is a party, copies of which have been delivered to Pentegra,
and (d) all employee manuals, materials, policies, procedures and
work-related rules, copies of which have been delivered to Pentegra. Dentist
is in compliance with all applicable laws, rules, regulations and ordinances
respecting employment and employment practices. Dentist has not engaged in
any unfair labor practice. There are no unfair labor practices charges or
complaints pending or threatened against Dentist, and Dentist has never been
a party to any agreement with any union, labor organization or collective
bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the
Assets is subject to any pending, nor does Dentist have knowledge of any
threatened, litigation, governmental investigation, condemnation or other
proceeding against or relating to or affecting Dentist, the Business, the
Assets or the transactions contemplated by this Agreement, and, to the
knowledge of Dentist, no basis for any such action exists, nor is there any
legal impediment of which Dentist has knowledge to the continued operation of
its business or the use of the Assets in the ordinary course, subject to
consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Dentist ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on
<PAGE>
such Exhibits, all of such Contracts are valid, binding and enforceable in
accordance with their terms and are in full force and effect, and no
defenses, offsets or counterclaims have been asserted or may be made by any
party thereto. Except as indicated on such Exhibits, there is not under any
such Contract any existing default by Dentist, or any condition or event of
which Dentist has knowledge which with notice or lapse of time, or both,
would constitute a default. Dentist has no knowledge of any default by any
other party to such Contracts. Dentist has not received notice of the
intention of any party to any Contract to cancel or terminate any Contract
and have no reason to believe that any amendment or change to any Contract is
contemplated by any party thereto. Other than those contracts, obligations
and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist
is not a party to any material written or oral agreement contract, lease or
arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product or
service;
(h) Loan agreement or other contract for money borrowed or lent or to
be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of the
Dentist, oral or written, that provide for prepayments or deferred installment
payments; or
(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Dentist on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
<PAGE>
(c) Made any payments to or loaned any money to any person or entity
other than in the ordinary course of business;
(d) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(e) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have been
required due to income or operations of Dentist since the Balance Sheet Date;
(f) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(g) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(h) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants or
agents, or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of any officer, employee, consultant or agent;
(i) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00);
(j) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(k) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties, assets
or business or the Business or the Assets, or experienced any other material
adverse change in its financial condition, assets, prospects, liabilities or
business; or
(l) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Dentist has not received any notice that any tax deficiency or
delinquency has been or may be asserted against Dentist. There are no
audits relating to taxes of Dentist pending or in process or, to the
knowledge of Dentist, threatened. Dentist is not currently the beneficiary of
any waiver of any statute of limitations in respect of taxes nor of any
extension of time within which to file any tax return or to pay any tax
assessment or deficiency. There are no liens or encumbrances relating to
taxes on or threatened against any of the assets of Dentist. Dentist has
withheld and paid all taxes required by law to have been withheld and paid by
it. Neither Dentist nor any predecessor of Dentist is or has been a party to
any tax allocation or sharing agreement or a member of an affiliated group of
corporations filing a consolidated Federal income tax return. Dentist has
delivered to Pentegra correct and complete copies of Dentist's three most
recently filed annual state, local and Federal income tax returns, together
with all examination reports and statements of deficiencies assessed against
or agreed to by Dentist during the three calendar year period preceding the
date of this Agreement. Dentist has neither made any payments, is obligated
to make any payments, or is a party to any agreement that
<PAGE>
under any circumstance could obligate it to make any payments that will not
be deductible under Code section 280G.
(b) Dentist does not intend to dispose of any of the shares of Pentegra
Common Stock to be received hereunder and is not a party to any plan,
arrangement or agreement for the disposition of such shares. Nothing contained
herein shall prohibit Dentist from selling such shares of Pentegra Common Stock
after the designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated
by this Agreement which may be now or hereafter asserted against Pentegra,
Dentist resulting from any action taken by Dentist or their respective agents
or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Dentist did not have, as of the Balance Sheet
Date, and has not incurred since that date and will not have incurred as of
the Closing Date, any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
other than those incurred in the ordinary course of business or as set forth
on EXHIBIT 2.16. Dentist does not know, or have reasonable grounds to know,
of any basis for the assertion against Dentist as of the Balance Sheet Date,
of any claim or liability of any nature in any amount not fully reflected or
reserved against on the Balance Sheet, or of any claim or liability of any
nature arising since that date other than those incurred in the ordinary
course of business or contemplated by this Agreement. All indebtedness of
Dentist (including without limitation, indebtedness for borrowed money,
guaranties and capital lease obligations) is described on EXHIBIT 2.19
attached hereto.
2.20 INSURANCE POLICIES. Dentist and each licensed professional of
Dentist carries property, liability, malpractice, workers' compensation and
such other types of insurance as is customary in the industry. Valid and
enforceable policies in such amounts are outstanding and duly in force and
will remain duly in force through the Closing Date. All such policies are
described in EXHIBIT 2.20 attached hereto and true and correct copies have
been delivered to Pentegra. Dentist has not received notice or other
communication from the issuer of any such insurance policy cancelling or
amending such policy or threatening to do so. Neither Dentist nor any
licensed professional employee of Dentist has any outstanding claims,
settlements or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Dentist has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist
Plan," and collectively "Dentist Plans") have been operated and administered
in all material respects in accordance with all applicable laws, rules and
regulations, including without limitation, ERISA, the Internal Revenue Code
of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment
Act of 1967, as amended, and the related rules and regulations adopted by
those Federal agencies responsible for the administration of such laws. No
act or failure to act by Dentist has resulted in a "prohibited transaction"
(as defined in ERISA) with respect to the Dentist Plans. No "reportable
event" (as defined in ERISA) has occurred with respect to any of the Dentist
Plans. Dentist has not previously made, is not currently making, and is not
obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Dentist Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at
<PAGE>
least equal to the value of plan liabilities or (ii) the value of plan
liabilities in excess of plan assets is disclosed on the Balance Sheet, all
as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Dentist, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed
professional employees, and the conduct of the Business and use of the
Assets, have complied with all applicable laws, rules, regulations and
licensing requirements, including, without limitation, the Federal
Environmental Protection Act, the Occupational Safety and Health Act, the
Americans with Disabilities Act and any environmental laws and medical waste
laws, and there exist no violations by Dentist or any licensed professional
employee of Dentist of any Federal, state or local law or regulation.
Dentist has not received any notice of a violation of any Federal, state and
local laws, regulations and ordinances relating to the operations of the
Business and Assets and no notice of any pending inspection or violation of
any such law, regulation or ordinance has been received by Dentist.
2.24 THIRD PARTY PAYORS. Dentist and each licensed professional
employee or independent contractor of Dentist has timely filed all claims or
other reports required to be filed with respect to the purchase of services
by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are
no pending appeals, overpayment determinations, adjustments, challenges,
audit, litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Dentist and each
licensed professional employee of Dentist. Neither Dentist nor any licensed
professional employee of Dentist has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Dentist and Dentist's licensed professional employees has not (a) knowingly
and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist
in this Agreement, and no Exhibit or certificate issued or executed by, or
information furnished by Dentist or to be furnished by Dentist to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Dentist has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer
or employee or family member of Dentist, or their respective spouses,
children or affiliates, owns directly or indirectly, on an individual or
joint basis, any interest in, has a compensation or other financial
arrangement with, or
<PAGE>
serves as an officer or director of, any customer or supplier or competitor
of Dentist or any organization that has a material contract or arrangement
with Dentist.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Dentist's services which
accounted for more than 10% of revenues of Dentist in the preceding fiscal
year. Dentist has good relations with all such payors and other material
payors of Dentist and none of such payors has notified Dentist that it
intends to discontinue its relationship with Dentist or to deny any claims
submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Dentist as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Pentegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would
not have a material adverse effect, there are no proceedings pending or, to
the knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has knowledge to the continued operation of its business or the use
of its Assets in the ordinary course.
<PAGE>
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Dentist pursuant
hereto, or in connection with the transactions contemplated hereby, contains
or will contain any untrue statement of a material fact, or omits or will
omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
SECTION 4. COVENANTS OF DENTIST.
Dentist agrees that between the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and conditions. Dentist agrees to complete the
Exhibits hereto to be provided by him in form and substance satisfactory to
Pentegra.
4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the
Assets in the ordinary course. Dentist shall not enter into any lease,
contract, indebtedness, commitment, purchase or sale or acquire or dispose of
any capital asset relating to the Business or the Assets except in the
ordinary course of business. Dentist shall use their best efforts to
preserve the Business and Assets intact and shall not take any action that
would have an adverse effect on the Business or Assets. Dentist shall use
their best efforts to preserve intact the relationships with payors,
customers, suppliers, patients and others having significant business
relations with Dentist. Dentist shall collect its receivables and pay its
trade payables in the ordinary course of business. Dentist shall not
introduce any new method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized
representatives access to, and make available for inspection, all of the
assets and business of Dentist, the Business and the Assets, including
employees, customers and suppliers and permit Pentegra and its authorized
representatives to inspect and make copies of all documents, records and
information with respect to the business or assets of Dentist, the Business
or the Assets as Pentegra or its representatives may request. Dentist shall
promptly
<PAGE>
notify Pentegra in writing of (a) any notice or communication relating to a
default or event that, with notice or lapse of time or both, could become a
default, under any contract, commitment or obligation to which Dentist is a
party or relating to the Business or the Assets, and (b) any adverse change
in Dentist's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall
use his best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby,
including consents described on EXHIBIT 2.4. Dentist shall use his best
efforts to obtain all licenses, permits, approvals or other authorizations
required under any law, rule, regulation, or otherwise to provide the
services of the Practice contemplated by the Service Agreement and to conduct
the intended business of the Practice and operate the Business and use the
Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance
with the provisions hereof, Dentist shall not, and shall use its best efforts
to cause Dentist's employees, agents and representatives not to, initiate,
solicit or encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer, including without limitation, any
proposal or offer to the Dentist, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of Dentist or
engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to
such proposal or offer, and Dentist will immediately cease any such
activities, discussions or negotiations heretofore conducted with respect to
any of the foregoing. Dentist shall immediately notify Pentegra if any such
inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Dentist or any entity might have any liability whatsoever
arising from any insurance, pension plan, employment tax or similar
liability of Dentist to any employee or other person or entity (including,
without limitation, any Dentist Plan and any liability under employment
contracts with Dentist) allocable to services performed prior to the Closing
Date. Dentist acknowledges that the purpose and intent of this covenant is
to assure that Pentegra shall have no liability whatsoever at any time after
the Closing Date with respect to any of Dentist's employees or similar
persons or entities, including, without limitation, any Dentist Plan for the
period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash
compensation of the Dentist (other than in the ordinary course of business)
or other employee or an independent contractor of Dentist, adopt, amend or
terminate any compensation plan, employment agreement, independent contractor
agreement, employee policies and procedures or employee benefit plan, take
any action that could deplete the assets of any employee benefit, or fail to
pay any premium or contribution due or file any report with respect to any
employee benefit plan, or take any other actions with respect to its
employees or employee matters which might have an adverse effect upon
Dentist, its business, assets or prospects.
4.8 [INTENTIONALLY OMITTED].
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best
efforts to take, or cause to be taken, all actions necessary to effect the
acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material
respect the tax or financial accounting methods or practices followed by
Dentist (including any material change in any assumption underlying, or any
method of calculating, any bad debt, contingency or other reserve), except
<PAGE>
as may be required by law or generally accepted accounting principles.
Dentist will duly, accurately and timely (without regard to any extensions of
time) file all returns, information statements and other documents relating
to taxes of Dentist required to be filed by it, and pay all taxes required to
be paid by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby
waive any compliance with the applicable state Bulk Transfers Act, if any.
Dentist covenants and agrees that all of the creditors with respect to the
Business and the Assets will be paid in full by Dentist prior to the Closing
Date, except to extent that any liability to such creditors is assumed by
Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall
furnish Pentegra with proof of payment of all creditors with respect to the
Business and the Assets. Notwithstanding the foregoing, Dentist may dispute
the validity or amount of any such creditor's claim without being deemed to
be in violation of this SECTION 4.11, provided that such dispute is in good
faith and does not unreasonably delay the resolution of the claim and
provided, further that Dentist agrees to indemnify and bond Pentegra for such
amounts as is satisfactory to Pentegra.
4.12 LEASE. If Dentist leases any of its premises from the Dentist or
other affiliate of Dentist, Pentegra shall have entered into a building lease
(the "Building Lease") with the owner of such premises on terms and
conditions satisfactory to Pentegra, the terms and conditions of which shall
include, without limitation, (i) a five year initial term plus three
five-year renewal options, (ii) a lease rate equal to the fair market value
lease rate, as agreed to by Pentegra, and (iii) such other provisions to be
acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made
by Pentegra for the purpose of allowing Pentegra to hire those non-dental
employees of Dentist designated by Pentegra, such employment to be effective
as of the Closing Date. Notwithstanding the above, Dentist shall remain
liable under any Dentist Plans for any claims incurred by any employees or
their spouses or dependents, and for all compensation, bonuses, benefits and
other such items and other liabilities related to Dentist's employees
incurred by Dentist prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all
employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall
be treated as "leased employees" (as defined in Code Section 414(n)) of
Dentist and shall be treated as Clinic employees for purposes of eligibility
and participation in Dentist Plans.
4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective
as of the Closing Date.
4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited
liability company, partnership or other legal entity (the "Practice")
approved by Pentegra for the purpose of practicing dentistry and entering
into the Service Agreement. The Practice shall be duly organized, in
existing and in good standing under the laws of the State in which the
Dentist and the Practice are to practice dentistry. The Practice shall have
all necessary power to own all of its assets and to carry on its business as
such business is now being conducted. The Dentist shall be the sole
member/shareholder/partner of the Practice and own all such interests free of
all security interests, claims, encumbrances and liens. Each interest in the
Practice shall be legally and validly issued and fully paid and
nonassessable. There shall be no outstanding (a) bonds, debentures, notes or
other obligations the holders of which have the right to vote with the
members/partners/shareholders of the Practice on any matter, (b) securities
of the Practice convertible into equity interests in the Practice, or (c)
commitments, options, rights or warrants to issue any such equity interests
in the Practice, to issue securities of the Practice convertible into such
equity interests, or to redeem any securities of the Practice. No interests
of the Practice shall have been issued or disposed of in violation of
<PAGE>
the preemptive rights, rights of first refusal or similar rights of any of
the Practice's members/partners/shareholders. The Practice shall quality to
do business as a foreign entity in any other state or jurisdiction by reason
of its business, properties or activities in or relating to such other state
or jurisdiction.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation,
Bylaws/Regulations and minutes of the Practice and all amendments thereto of
the Practice shall have been delivered to Pentegra and shall be in form and
substance satisfactory to Pentegra. The minute books of the Practice shall
contain all accurate minutes of the meetings of and consents to actions taken
without meetings of the members\managers/partners/board of directors of the
Practice since its formation. The books of account of the Practice shall
have been kept accurately in the ordinary course of business and the
revenues, expenses, assets and liabilities of the Practice shall have been
properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements
and other documents to be executed and delivered by it pursuant to this
Agreement, including without limitation, the Service Agreement and each
Employment Agreement or to be executed and delivered on the Closing Date, and
has taken all action required by law, its Organization/Partnership
Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to
authorize the execution, delivery and performance of such documents. The
Service Agreement, the Employment Agreement and the other agreements
contemplated hereby shall have been duly executed and delivered by the
Practice and constitute or will constitute the legal, valid and binding
obligations of the Practice enforceable against the Practice in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of the
Service Agreement, the Employment Agreements and the other agreements
contemplated hereby will not violate any provision of the organizational
documents of the Practice or any provisions of, or result in the acceleration
of, any obligation under any mortgage, lien, lease, agreement, rent,
instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any
material restrictions of any kind to which the Practice is subject, or result
in any lien or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and has filed with
the proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
<PAGE>
SECTION 6. COVENANTS OF PENTEGRA AND DENTIST.
Pentegra and Dentist agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to
promptly prepare and file with the Securities Exchange Commission ("SEC") the
Registration Statement on Form S-1 (or other appropriate Form) to be filed by
Pentegra in connection with its Initial Public Offering (including the
prospectus constituting a part thereof, the "Registration Statement"). Pentegra
shall obtain all necessary state securities laws or "Blue Sky" permits and
approvals required to carry out the transactions contemplated by this Agreement
and the Dentist shall furnish all information concerning Dentist as may be
reasonable requested in connection with any such action.
Dentist represents and warrants that none of the information or documents
supplied or to be supplied by it specifically for inclusion in the Registration
Statement, by exhibit or otherwise, will, at the time the Registration Statement
and each amendment or supplement thereto, if any, becomes effective under the
Securities Act of 1933, 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, in light of the circumstances under which they were
made, not misleading. Dentist shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.
Dentist shall furnish Pentegra will all information concerning itself and
such other matters as may be reasonable requested by Pentegra in connection with
the preparation of the Registration Statement and each amendment or supplement
thereto, or any other statement, filing, notice or application made by or on
behalf of each such party or any of its subsidiaries to any governmental entity
in connection with the transactions contemplated by the Other Agreements or this
Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at or
prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Dentist contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Dentist prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Dentist shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Dentist, the Business and the Assets, the results of which shall
be satisfactory to Pentegra in its sole discretion.
<PAGE>
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service Agreement"),
in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which
Pentegra will provide management services to the Practice. Dentist shall have
executed and delivered a Guaranty Agreement in substantially the form attached
as EXHIBIT 4.10 of the Service Agreement pursuant to which Dentist shall, among
other things, guaranty the obligations of the Practice under the Service
Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her
employment agreement and executed an employment agreement ("Employment
Agreement") with the Practice in form and substance attached hereto as EXHIBIT
7.8 and otherwise satisfactory to Dentist and Pentegra.
7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary
government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly
executed in form satisfactory to Pentegra and its counsel, referred to in
SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or
payables between Dentist and its affiliates and Dentist shall not have any
liabilities, including indebtedness, guaranties and capital leases, that are not
set forth on EXHIBIT 2.19.
7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured
on its liability insurance program in accordance with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Dentist since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. DENTIST'S CONDITIONS PRECEDENT.
The obligations of Dentist hereunder are subject to fulfillment at or prior
to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Pentegra contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Pentegra prior to the Closing Date.
<PAGE>
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly
executed in form satisfactory to Dentist and its counsel, referred to in
SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF DENTIST. Within five business days after requested by
Pentegra, Dentist shall deliver to Pentegra the following, all of which shall be
in a form satisfactory to counsel to Pentegra and shall be held by Jackson &
Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an
escrow agreement or letter agreement in form and substance mutually acceptable
to the parties hereto:
(a) an executed original Service Agreement and executed originals of
all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a bill of sale conveying the Assets to Pentegra;
(d) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(e) certificates of Dentist dated as of the Closing Date, (i) as to
the truth and correctness of the representations and warranties of Dentist
contained herein; (ii) as to the performance of and compliance by Dentist with
all covenants contained herein; and (iii) certifying that all conditions
precedent of Dentist to the Closing have been satisfied;
(f) an opinion of counsel to Dentist opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Dentist, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Pentegra;
(g) non-foreign affidavits executed by Dentist;
(h) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(i) an executed Registration Rights Agreement between Pentegra and
Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
<PAGE>
(j) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall
deliver to Dentist the following, all of which shall be in a form satisfactory
to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for
Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter
agreement in form and substance mutually acceptable to the parties hereto:
(a) the Acquisition Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance of
this Agreement and all related documents and agreements each certified by the
Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii) certifying
that all conditions precedent of Pentegra to the Closing have been satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and the
State of incorporation of Dentist;
(h) an opinion of counsel to Pentegra opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Pentegra, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Dentist;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Dentist to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in
any Exhibit attached hereto, any agreement executed pursuant hereto, and any
certificate executed and delivered by any party pursuant to the terms of this
Agreement, shall constitute representations and warranties of Dentist or
<PAGE>
of Pentegra, as the case may be. All such representations and warranties,
and all representations and warranties expressly labeled as such in this
Agreement shall survive the date of this Agreement and the Closing Date for a
period of five (5) years following the Closing Date, except that (i) the
representations and warranties with respect to environmental and medical
waste laws and health care laws and matters shall survive for a period of
fifteen (15) years and tax representations shall survive until one year after
the expiration of the applicable statute of limitations. Each party
covenants with the other parties not to make any claim with respect to such
representations and warranties, against any party after the date on which
such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof,
unless such party has timely given the notice required in SECTION 10.2, 10.3
or 10.4 hereof, as the case may be. Each party hereby releases, acquits and
discharges the other party from any and all claims and demands, actions and
causes of action, damages, costs, expenses and rights of setoff with respect
to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable,
are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION
10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES
(INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL
THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY
PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF,
OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION
10.3
<PAGE>
AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS,
AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES
OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN
"INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES,
LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES
(INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL
THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH
RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR AFTER
THE CLOSING DATE,
(D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE
FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING
FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY
PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR
AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION,
PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE
OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS
COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS,
THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE
<PAGE>
THEREIN A MATERIAL FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the defense
of such action or proceeding, such Indemnified Person shall notify Indemnitor
thereof. If any such action or other proceeding shall be brought against any
Indemnified Person, Indemnitor shall, upon written notice given within a
reasonable time following receipt by Indemnitor of such notice from Indemnified
Person, be entitled to assume the defense of such action or proceeding with
counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person;
provided, however, that any Indemnified Person may at its own expense retain
separate counsel to participate in such defense. Notwithstanding the foregoing,
Indemnified Person shall have the right to employ separate counsel at
Indemnitor's expense and to control its own defense of such action or proceeding
if, in the reasonable opinion of counsel to such Indemnified Person, (a) there
are or may be legal defenses available to such Indemnified Person or to other
Indemnified Persons that are different from or additional to those available to
Indemnitor and which could not be adequately advanced by counsel chosen by
Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor
and such Indemnified Person that would make such separate representation
advisable; provided, however, that in no event shall Indemnitor be required to
pay fees and expenses hereunder for more than one firm of attorneys of
Indemnified Person in any jurisdiction in any one action or proceeding or group
of related actions or proceedings. Indemnitor shall not, without the prior
written consent of any Indemnified Person, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding to which such Indemnified Person is a party unless such settlement,
compromise or consent includes an unconditional release of such Indemnified
Person from all liability arising or potentially arising from or by reason of
such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Dentist giving rise to indemnification
under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset
the amount of damages incurred by it as a result of such breach of warranty,
representation, covenant or agreement against any amounts payable by Pentegra,
including the amounts payable under the Service Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Dentist
contained in this Agreement or in any certificate or other document executed and
delivered by Dentist pursuant to this Agreement is or becomes untrue or breached
in any material respect or if Dentist fails to comply in any material respect
with any covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
(c) at any time by Dentist if any representation or warranty of Pentegra
contained in this Agreement or
<PAGE>
in any certificate or other document executed and delivered by Pentegra
pursuant to this Agreement is or becomes untrue or breached in any material
respect or if Pentegra fails to comply in any material respect with any
covenant or agreement contained herein and such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
(d) by Pentegra or Dentist if the transaction contemplated hereby shall
not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Dentist, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date,
Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber,
pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra
Common Stock received by such party hereunder, (ii) any interest (including
without limitation, an option to buy or sell) in any shares of Pentegra Common
Stock, in whole or in part, and no such attempted transfer shall be treated as
effective for any purpose or (b) engage in any transaction, whether or not with
respect to any shares of Pentegra Common Stock or any interest therein, the
intent or effect of which is to reduce the risk of owning shares of Pentegra
Common Stock. The certificates evidencing the Pentegra Common Stock delivered
to Dentist pursuant to the terms hereof will bear a legend substantially in the
form set forth below and containing such other information as Pentegra may deem
necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the
shares of Pentegra Common Stock to be delivered to Dentist pursuant to this
Agreement have not been and will not be registered under the Securities Act of
1933 and may not be resold without compliance with the Securities Act of 1933.
The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement
is being acquired solely for its own account, for investment purposes only and
with no present intention of distributing, selling or otherwise disposing of it
in connection with a distribution. Dentist covenants, warrants and represents
that none of the shares of Pentegra Common Stock issued to it will be offered,
sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
except after full compliance with all of the applicable provisions of the
Securities Act, as amended, and the rules and regulations of the Securities
Exchange Commission and applicable state securities laws and regulations. All
certificates evidencing shares of Pentegra Common Stock shall bear the following
legend in addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
<PAGE>
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Dentist resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic
risk of an investment in Pentegra Common Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and has such
knowledge and experience in financial and business matters that they are capable
of evaluating the merits and risks of the proposed investment and therefore have
the capacity to protect its own interests in connection with the acquisition of
the Pentegra Common Stock. Dentist and its representatives have had an adequate
opportunity to ask questions and receive answers from the officers of Pentegra
concerning any and all matters relating to the background and experience of the
officers and directors of Pentegra, the plans for the operations of the business
of Pentegra, and any plans for additional acquisitions and the like. Dentist
and its representatives have asked any and all questions in the nature described
in the preceding sentence and all questions have been answered to their
satisfaction. Dentist is an "accredited investors" as defined in Regulation D
of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes
and acknowledges that it had in the past, currently have, and in the future may
possibly have, access to certain confidential information of Pentegra that is
valuable, special and unique assets of Pentegra's businesses. Dentist agrees
that it will not disclose such confidential information to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
unless (i) such information becomes available to or known by the public
generally through no fault of Dentist, (ii) disclosure is required by law or the
order of any governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), Dentist shall, if
possible, give prior written notice thereof to the other parties hereto, and
provide such other parties hereto with the opportunity to contest such
disclosure, (iii) Dentist reasonably believes that such disclosure is required
in connection with the defense of a lawsuit against the disclosing party, or
(iv) Dentist is the sole and exclusive owner of such confidential information as
a result of the transactions contemplated hereunder or otherwise. In the event
of a breach or threatened breach by Dentist of the provisions of this SECTION
13, Pentegra shall be entitled to an injunction restraining Dentist from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting Pentegra from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
The obligations of the parties under this SECTION 13 shall survive the
termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement, together with the transactions contemplated by the Other
Agreement and the Initial Public Offering, will qualify as an exchange meeting
the requirements of Section 351 of the Code. The tax returns (and schedules
thereto) of Dentist and Pentegra shall be filed in a manner consistent with
such intention and Dentist and Pentegra shall each provide the other with such
tax information, reports, returns or schedules as may be reasonably required to
assist the other in so reporting the transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery, or by
facsimile AND overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
<PAGE>
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Dentist:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this Agreement,
whether or not such transactions are consummated. Without limiting the
generality of the foregoing and whether or not such liabilities may be deemed to
have been incurred in the ordinary course of business, Pentegra shall not be
liable to or required to pay, either directly or indirectly, any fees and
expenses of legal counsel, accountants, auditors or other persons or entities
retained by Dentist for services rendered in connection with negotiating and
closing the transactions contemplated by this Agreement or the documents to be
executed in connection herewith, whether or not such costs or expenses are
incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure, either
written or oral, regarding the transactions contemplated by this Agreement
without the prior written consent of the other party, provided that the
foregoing shall not prohibit any disclosure (a) by press release, filing or
otherwise that Pentegra has determined in good faith judgment to be required by
Federal securities laws or the rules of the National Association of Securities
Dealers, (b) to attorneys, accountants, investment bankers or other agents of
the parties assisting the parties in connection with the transactions
contemplated by this Agreement, and (c) by Pentegra in connection with the
conduct of its Initial Public Offering and conducting an examination of the
operations and assets of Dentist.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED
<PAGE>
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF
Dentist AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are
integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and not
only in connection with the specific representation in which they are explicitly
referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS
ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY
AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR
ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one and the same
instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any entity
that, through one or more intermediaries is, controlled, controlled by or under
common control with, Pentegra. Upon any such assignment prior to the Closing,
all references herein to Pentegra (including those to Pentegra Common Stock)
shall be deemed to include references to the assignee and the assignee's common
stock. Notwithstanding any such assignment, Pentegra shall not, absent a
written release from Dentist, be relieved from its obligations to Dentist under
this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Dentist, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions
<PAGE>
hereof must be in writing, and signed by the parties hereto. The waiver of
any of the terms and conditions of this Agreement shall not be construed as a
waiver of any other terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist
(hereinafter referred to as a "Party"), whether made before or after the
institution of any legal proceeding, any dispute among the parties hereto in
any way arising out of, related to, or in connection with this Agreement
(hereinafter a "Dispute"), shall be resolved by binding arbitration in
accordance with the terms of this Section (hereinafter the "Arbitration
Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in accordance
with the terms of this Arbitration Program, the Commercial Arbitration Rules of
the AAA. In the event of any inconsistency between this Arbitration Program and
those rules or statutes, then the terms of this Arbitration Program shall
control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been completed
and the arbitrators have determined each party's post-arbitration obligations
and responsibilities as it relates to such warranties and covenants. No
provision of, nor the exercise of any rights under, this Arbitration Program
shall limit the right of any Party at any time to seek or use ancillary or
preliminary judicial or non-judicial self help remedies for the purposes of
obtaining, perfecting, preserving, or foreclosing upon any personal property in
which there has been granted a security interest or lien by a Party in the
Documents. In Disputes involving indebtedness or other monetary obligations,
each Party agrees that the other Party may proceed against all liable persons,
jointly and severally against one or more of them, without impairing rights
against other liable persons. Nor shall a Party be required to join the
principal obligor or any other liable persons (e.g., sureties or guarantors) in
any proceeding against a particular person. A Party may release or settle with
one or more liable persons as the Party deems fit without releasing or impairing
rights to proceed against any persons not so released. All statutes of
limitation that would otherwise be applicable shall apply to any arbitration
proceeding.
The party seeking arbitration shall notify the other Party, in writing, of
that Party's desire to arbitrate a dispute; and each Party shall, within twenty
(20) days from the date such notification is received, select an arbitrator, and
those two arbitrators shall select a third arbitrator within ten (10) days
thereafter. The issues or claims in dispute shall be committed to writing,
separately stated and numbered, and each party's proposed answers or contentions
shall be signed below the questions. Failure by a party to select an arbitrator
within the prescribed time period shall serve as that Party's acquiescence and
acceptance of the other party's selection of arbitrator. The arbitrators shall
resolve all Disputes in accordance with the applicable substantive law. Any
Dispute shall be decided by a majority vote of three arbitrators, unless the
claim or amount in controversy does not exceed $100,000.00, in which case a
single arbitrator (who shall have authority to render a maximum award of
$100,000.00, including all damages of any kind, costs and fees) may decide the
Dispute. The arbitrators may grant any remedy or relief that the arbitrators
deem just and equitable and within the scope of this Arbitration Program. The
arbitrators may also grant such ancillary relief as is necessary to make
effective the award. In all arbitration proceedings the arbitrators shall make
specific and written findings of fact and conclusions of law. In all
arbitration proceedings in which the amount in controversy exceeds $100,000.00,
in the aggregate, the Parties shall have in addition to the statutory right to
seek vacation or modification of any award pursuant to applicable law, the right
to seek vacation or modification of any award that is based in whole, or in
part, on an incorrect or erroneous ruling of law by appeal to an appropriate
court having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must be
filed in a court having jurisdiction over the Dispute within 15 days from the
date the award in rendered. The arbitrators' findings of fact shall be binding
on all Parties and shall not be subject to further review except as otherwise
allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in writing
by the Parties or, in the absence of such agreement in Phoenix, Arizona or the
headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this
Arbitration Program shall survive any termination, amendment, or expiration of
the Documents, unless the Parties otherwise expressly agree in writing making
specific reference to this Arbitration Program. To the extent permitted by
applicable law, the arbitrator shall have the power to award
<PAGE>
recovery of all costs and fees (including attorney's fees, administrative
fees, and arbitrators' fees) to the prevailing Party. This Arbitration
Program may be amended, changed, or modified only by a writing which
specifically refers to this Arbitration Program and which is signed by all
the Parties. If any term, covenant, condition or provision of the
Arbitration Program is found to be unlawful or invalid or unenforceable, such
illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or by
applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be found
to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect. In lieu of such
provision, there shall be added automatically as part of this Agreement, a
provision as similar in its terms to such provision as may be possible and be
legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
PENTEGRA DENTAL GROUP, INC.
By: /s/ James L. Dunn, Jr.
----------------------------------------
Its: Senior Vice President
----------------------------------------
/s/ Jack Stephens, D.D.S.
--------------------------------------------
Jack Stephens, D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
- ------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 [intentionally omitted]
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
Y. PAUL SUZUKI, D.D.S., P.S.
and
PAUL SUZUKI, D.D.S.
<PAGE>
TABLE OF CONTENTS
PAGE
Section 1. TERMS OF THE REORGANIZATION
1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . 2
1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . 4
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . 5
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . 6
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . 9
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . 11
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . 12
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . 12
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . 13
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . 13
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . 13
Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . 13
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . 14
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . 14
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . 14
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . 14
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . 14
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . 14
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . 14
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . 14
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . 14
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . 14
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . 15
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . 15
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . 15
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . 15
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . 15
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . 16
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . 17
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . 17
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . 18
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . 19
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . 20
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . 20
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . 21
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . 22
14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . 22
14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . 22
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . 22
14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . 22
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . 23
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . 23
14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . 23
14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . 23
14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . 23
14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . 24
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and
executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC.,
a Delaware corporation ("Pentegra"), Y. PAUL SUZUKI, D.D.S., P.S., a
Washington professional corporation ("Company") and PAUL SUZUKI, D.D.S.,
shareholder of Company (referred to herein as "Shareholder" or
"Shareholders").
WITNESSETH:
WHEREAS, Company operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, the Boards of Directors of the Company and Pentegra have
determined that a reorganization between each of them is in the best
interests of their respective companies;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Company, the "Target Companies")
and simultaneously with the closing of the reorganization contemplated
herein, intends to consummate its initial public offering ("Initial Public
Offering") of shares of its common stock, par value $.01 per share ("Pentegra
Common Stock");
WHEREAS, it is intended for Federal income tax purposes that the
reorganization contemplated by this Agreement shall qualify as an
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE REORGANIZATION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.2 MERGER. Subject to and upon the terms and conditions contained
herein, on the Closing Date, the Company shall be merged with and into
Pentegra (or its designated affiliate, in which case, the references herein
to Pentegra shall be to such designated affiliate and its shares of common
stock) in accordance with this Agreement and the separate corporate existence
of the Company shall thereupon cease ("Merger"). Pentegra shall be the
surviving corporation in the Merger ("Surviving Corporation") and shall
<PAGE>
continue to be governed by the laws of the State of Delaware and the separate
corporate existence of Pentegra with all rights, privileges, powers,
immunities and purposes shall continue unaffected by the Merger. The Merger
shall have the effects specified in the Delaware General Corporation Law and
the Washington Business Corporation Law. If all the conditions to the Merger
set forth herein shall have been fulfilled or waived in accordance herewith
and this Agreement shall not have been terminated in accordance herewith, the
parties hereto shall cause to be properly executed and filed on the Closing
Date Certificates of Merger for the Company meeting the applicable legal
requirements. The Mergers shall become effective on the Closing Date or the
filing of such documents, in accordance with applicable law, or at such later
time as the parties hereto have agreed upon and designated in such merger
filings.
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of
Incorporation and Bylaws of Pentegra shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation until duly amended in
accordance with their terms.
1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra
immediately prior to the effective date of the Merger shall be the directors
of the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal
in accordance with the Surviving Corporation's Certificate of Incorporation
and Bylaws. The persons who are officers of Pentegra immediately prior to
the effective date of the Merger shall be the officers of the Surviving
Corporation and shall hold their respective offices until their successors
have been duly elected or appointed and qualified or until their earlier
death, resignation or removal.
1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and
without any action on the part of the holder thereof, all shares of the
Company's common stock issued and outstanding on the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired and
shall cease to exist, and each holder of a certificate of representing shares
of Company common stock shall thereafter cease to have any rights with
respect to such shares except the right to receive the consideration set
forth on ANNEX I attached hereto (the "Merger Consideration"). Each share
of common stock of the Company held in treasury at the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired
without payment of any consideration therefor. On the effective date of the
Merger, each share of Pentegra Common Stock issued and outstanding shall, by
virtue of he Mergers, and without any action on the part of the holder
thereof, continue unchanged and remain outstanding as a share of validly
issued, fully paid and nonassessable share of Surviving Corporation common
stock.
1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the
Merger, the Shareholders, as the holders of a certificate or certificates
representing shares of Company common stock shall, upon surrender of such
certificate or certificates, receive the Merger Consideration, and until the
certificate or certificates of Company common stock shall have been
surrendered by the Shareholder and replaced by a certificate or certificates
representing Pentegra Common Stock (as set forth on ANNEX I), the certificate
or certificates of Company common stock shall, for all purposes be deemed to
evidence ownership of the number of shares of Pentegra Common Stock
determined in accordance with the provisions of ANNEX I. All shares of
Pentegra Common Stock issuable to the Shareholders in the Merger shall be
deemed for all purposes to have been issued by Pentegra on the Closing Date.
The Shareholders shall deliver to Pentegra at Closing the certificate or
certificates representing the Company common stock owned by them, duly
endorsed in blank by the Shareholders, or accompanied by duly executed blank
stock powers, and with all necessary transfer tax and other revenue stamps,
acquired at the Shareholder's expense, affixed and cancelled.
1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this
<PAGE>
Agreement, the Company and Shareholders shall excecute and deliver all such
deeds, bills of sale, assignments and assurances and take and do all such
other actions and things as may be necessary or desirable to vest, perfect or
confirm any and all right, title and interest in, to and under the Assets in
Pentegra or otherwise to carry out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional
corporation or association, as applicable, duly organized, validly existing
and in good standing under the laws of the State of Washington. Company has
all necessary corporate powers to own all of its assets and to carry on its
business as such business is now being conducted. Company does not own stock
in or control, directly or indirectly, any other corporation, association or
business organization, nor is Company a party to any joint venture or
partnership. The Shareholders are the sole shareholders of Company and own
all outstanding shares of capital stock free of all security interests,
claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each
share of Company's common stock has been legally and validly issued and fully
paid and nonassessable. No shares of capital stock of Company are owned by
Company in treasury. There are no outstanding (a) bonds, debentures, notes or
other obligations the holders of which have the right to vote with the
stockholders of Company on any matter, (b) securities of Company convertible
into equity interests in Company, or (c) commitments, options, rights or
warrants to issue any such equity interests in Company, to issue securities
of Company convertible into such equity interests, or to redeem any
securities of Company. No shares of capital stock of Company have been
issued or disposed of in violation of the preemptive rights, rights of first
refusal or similar rights of any of Company's stockholders. Company is not
required to qualify to do business as a foreign corporation in any other
state or jurisdiction by reason of its business, properties or activities in
or relating to such other state or jurisdiction. Company does not have any
assets, employees or offices in any state other than the state set forth in
the first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate
power to execute, deliver and perform this Agreement and all agreements and
other documents executed and delivered by it pursuant to this Agreement or to
be executed and delivered on the Closing Date, and has taken all action
required by law, its Articles or Certificate of Incorporation, its Bylaws or
otherwise, to authorize the execution, delivery and performance of this
Agreement and such related documents. Each Shareholder has the legal
capacity to enter into and perform this Agreement and the other agreements to
be executed and delivered in connection herewith. Company has obtained the
approval of its stockholders necessary to the consummation of the
transactions contemplated herein. This Agreement and all agreements and
documents executed and delivered in connection herewith have been, or will be
as of the Closing Date, duly executed and delivered by Company and
Shareholders, as appropriate, and constitute or will constitute the legal,
valid and binding obligations of Company and Shareholders, enforceable
against Company and Shareholders in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of
consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, violate any provision of the Articles or
Certificate of Incorporation or Bylaws of Company or any provisions of, or
result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or
decree to which Company or any Shareholder is a party or by which Company or
any Shareholder is bound, or violate any material restrictions of any kind to
which Company is subject, or result in any lien or encumbrance on any of
Company's assets or the Assets.
<PAGE>
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to
the knowledge of Company and Shareholders, threatened, which may result in
the revocation, cancellation or suspension, or any adverse modification, of
any such licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Company or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been declared or paid by Company on any of its capital stock
since the Balance Sheet Date. No repurchase of any of Company's capital
stock has been approved, effected or is pending, or is contemplated by
Company.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Company and all
amendments thereto have been delivered to Pentegra. The minute books of
Company contain accurate minutes of all meetings of and consents to actions
taken without meetings of the Board of Directors and stockholders of Company
since its formation. The books of account of Company have been kept
accurately in the ordinary course of business and the revenues, expenses,
assets and liabilities of Company have been properly recorded in such books.
2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any
related unaudited statements of income, retained earnings, schedule of
accounts receivable, accounts payable and accrued liabilities, and cash flows
for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Company as of
the dates and for the periods indicated and reflect all fixed and contingent
liabilities of Company.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Company or any Shareholder leases, as lessor or lessee,
real or personal property used in operating the Business, related to the
Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and
enforceable in accordance with their respective terms, and there is not under
any such lease any existing default by Company, as lessor or lessee, or any
condition or event of which any Shareholder or Company has knowledge which
with notice or lapse of time, or both, would constitute a default, in respect
of which Company or Shareholders have not taken adequate steps to cure such
default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Company and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances
set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to the Closing Date and evidence
of such releases of liens and claims shall be provided to Pentegra on the
<PAGE>
Closing Date and the Assets shall not be used to satisfy such liens, claims
or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Company, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Company has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Company, including the names of any entities from whom Company previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Company in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Company has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the name of each director and officer of Company
and the offices held by each, (b) the most recent payroll report of Company,
showing all current employees of Company and their current levels of
compensation, (c) promised increases in compensation of employees of Company
that have not yet been effected, (d) oral or written employment agreements,
consulting agreements or independent contractor agreements (and all
amendments thereto) to which Company is a party, copies of which have been
delivered to Pentegra, and (e) all employee manuals, materials, policies,
procedures and work-related rules, copies of which have been delivered to
Pentegra. Company is in compliance with all applicable laws, rules,
regulations and ordinances respecting employment and employment practices.
Company has not engaged in any unfair labor practice. There are no unfair
labor practices charges or complaints pending or threatened against Company,
and Company has never been a party to any agreement with any union, labor
organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the
Business nor any of the Assets is subject to any pending, nor does Company or
any Shareholder have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Company, any Shareholder, the Business, the Assets or the
transactions contemplated by this Agreement, and, to the knowledge of Company
and Shareholders, no basis for any such action exists, nor is there any legal
impediment of which Company or any Shareholder has knowledge to the continued
operation of its business or the use of the Assets in the ordinary course,
subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Company has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Company ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted or may be made
by any party thereto. Except as indicated on such Exhibits, there is not
under any such Contract any existing default by Company or any Shareholder,
or any condition or event of which Company or any Shareholder has
<PAGE>
knowledge which with notice or lapse of time, or both, would constitute a
default. Company and Shareholders have no knowledge of any default by any
other party to such Contracts. Company and Shareholders have not received
notice of the intention of any party to any Contract to cancel or terminate
any Contract and have no reason to believe that any amendment or change to
any Contract is contemplated by any party thereto. Other than those
contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13
and EXHIBIT 2.15, Company are not a party to any material written or oral
agreement contract, lease or arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product or
service;
(h) Loan agreement or other contract for money borrowed or lent or to
be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of the
Company or Shareholders, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Company on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
<PAGE>
(d) Made any payments to or loaned any money to any person or entity
other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Company since the Balance Sheet
Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(j) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties,
assets or business or the Business or the Assets, or experienced any other
material adverse change in its financial condition, assets, prospects,
liabilities or business;
(n) Declared or paid a distribution, payment or dividend of any
kind on the capital stock of Company;
(o) Repurchased, approved any repurchase or agreed to repurchase
any of Company's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Company has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Company has not received any notice that any tax deficiency or
delinquency has been or may be asserted against Company. There are no
audits relating to taxes of Company pending or in process or, to the
knowledge of Company, threatened. Company is not currently the beneficiary of
any waiver of any statute of limitations in respect of taxes nor of any
extension of time within which to file any tax return or to pay any tax
assessment or deficiency. There are no liens or encumbrances relating to
taxes on or threatened against any of the assets of Company. Company has
withheld and paid all taxes required by law to have been withheld and paid by
it. Neither Company nor any
<PAGE>
predecessor of Company is or has been a party to any tax allocation or
sharing agreement or a member of an affiliated group of corporations filing a
consolidated Federal income tax return. Company has delivered to Pentegra
correct and complete copies of Company's three most recently filed annual
state, local and Federal income tax returns, together with all examination
reports and statements of deficiencies assessed against or agreed to by
Company during the three calendar year period preceding the date of this
Agreement. Company has neither made any payments, is obligated to make any
payments, or is a party to any agreement that under any circumstance could
obligate it to make any payments that will not be deductible under Code
section 280G.
(b) No Shareholder presently intends to dispose of any of the shares of
Pentegra Common Stock to be received hereunder nor is a party to any plan,
arrangement or agreement for the disposition of such shares. Company and
Shareholders have no knowledge, after due inquiry, of any such intent, plan,
arrangement or agreement by any Shareholder. Nothing contained herein shall
prohibit Shareholders from selling such shares of Pentegra Common Stock after
the designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated
by this Agreement which may be now or hereafter asserted against Pentegra,
Company or Company's shareholders resulting from any action taken by Company
or any Shareholder or their respective agents or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Company did not have, as of the Balance Sheet
Date, and has not incurred since that date and will not have incurred as of
the Closing Date, any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
other than those incurred in the ordinary course of business or as set forth
on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable
grounds to know, of any basis for the assertion against Company or any
Shareholder as of the Balance Sheet Date, of any claim or liability of any
nature in any amount not fully reflected or reserved against on the Balance
Sheet, or of any claim or liability of any nature arising since that date
other than those incurred in the ordinary course of business or contemplated
by this Agreement. All indebtedness of Company (including without
limitation, indebtedness for borrowed money, guaranties and capital lease
obligations) is described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed
professional of Company carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the
industry. Valid and enforceable policies in such amounts are outstanding and
duly in force and will remain duly in force through the Closing Date. All
such policies are described in EXHIBIT 2.20 attached hereto and true and
correct copies have been delivered to Pentegra. Neither Shareholders nor
Company have not received notice or other communication from the issuer of
any such insurance policy cancelling or amending such policy or threatening
to do so. Neither Company, nor any Shareholder nor any licensed professional
employee of Company has any outstanding claims, settlements or premiums owed
against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Company has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company
Plan," and collectively "Company Plans") have been operated and administered
in all material respects in
<PAGE>
accordance with all applicable laws, rules and regulations, including without
limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII
of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as
amended, the Age Discrimination in Employment Act of 1967, as amended, and
the related rules and regulations adopted by those Federal agencies
responsible for the administration of such laws. No act or failure to act by
Company has resulted in a "prohibited transaction" (as defined in ERISA) with
respect to the Company Plans. No "reportable event" (as defined in ERISA)
has occurred with respect to any of the Company Plans. Company has not
previously made, is not currently making, and is not obligated in any way to
make, any contributions to any multiemployer plan within the meaning of the
Multi-Employer Pension Plan Amendments Act of 1980. With respect to each
Company Plan, either (i) the value of plan assets (including commitments
under insurance contracts) is at least equal to the value of plan liabilities
or (ii) the value of plan liabilities in excess of plan assets is disclosed
on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Company, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and
Company's licensed professional employees, and the conduct of the Business
and use of the Assets, have complied with all applicable laws, rules,
regulations and licensing requirements, including, without limitation, the
Federal Environmental Protection Act, the Occupational Safety and Health Act,
the Americans with Disabilities Act and any environmental laws and medical
waste laws, and there exist no violations by Company, any Shareholder or any
licensed professional employee of Company of any Federal, state or local law
or regulation. Company and Shareholders have not received any notice of a
violation of any Federal, state and local laws, regulations and ordinances
relating to the operations of the Business and Assets and no notice of any
pending inspection or violation of any such law, regulation or ordinance has
been received by Company.
2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed
professional employee or independent contractor of Company has timely filed
all claims or other reports required to be filed with respect to the purchase
of services by third-party payors, and all such claims or reports are
complete and accurate, and has no liability to any payor with respect
thereto. There are no pending appeals, overpayment determinations,
adjustments, challenges, audit, litigation or notices of intent to open
Medicare or Medicaid claim determinations or other reports required to be
filed by Company, any Shareholder and each licensed professional employee of
Company. Neither Company, nor any Shareholder, nor any licensed professional
employee of Company has been convicted of, or pled guilty or nolo contendere
to, patient abuse or negligence, or any other Medicare or Medicaid program
related offense and none has committed any offense which may serve as the
basis for suspension or exclusion from the Medicare and Medicaid programs or
any other third party payor program. With respect to payors, Company,
Shareholders and Company's licensed professional employees has not (a)
knowingly and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company
or Shareholders in this Agreement, and no Exhibit or certificate issued or
executed by, or information furnished by, officers or directors of Company or
any Shareholder and furnished or to be furnished to Pentegra pursuant hereto,
or in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make the statements or facts contained
<PAGE>
therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Company has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Company, or their respective spouses,
children or affiliates, owns directly or indirectly, on an individual or
joint basis, any interest in, has a compensation or other financial
arrangement with, or serves as an officer or director of, any customer or
supplier or competitor of Company or any organization that has a material
contract or arrangement with Company.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Company's services which
accounted for more than 10% of revenues of Company in the preceding fiscal
year. Company has good relations with all such payors and other material
payors of Company and none of such payors has notified Company that it
intends to discontinue its relationship with Company or to deny any claims
submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Company and Shareholders as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would
not have a material adverse effect, there are no proceedings pending or, to
the
<PAGE>
knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has knowledge to the continued operation of its business or the use
of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the reorganization contemplated
hereby will be as of the Closing Date duly and validly authorized by all
necessary corporate action on the part of Pentegra. The Pentegra Common
Stock to be issued in connection with the reorganization contemplated hereby,
when issued in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Company or any
Shareholder pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, agree that between the
date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall
use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Company
and Shareholders agree to complete the Exhibits hereto to be provided by them
in form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the
Business and use the Assets in the ordinary course. Company and Shareholders
shall not enter into any lease, contract, indebtedness, commitment, purchase
or sale or acquire or dispose of any capital asset relating to the Business
or the Assets except in the ordinary course of business. Company and
Shareholders shall use their best efforts to preserve the Business and Assets
intact and shall not take any action that would have an adverse effect on the
Business or Assets. Company and Shareholders shall use their best efforts to
preserve intact the relationships with payors, customers, suppliers, patients
and others having significant business relations with
<PAGE>
Company. Company and Shareholders shall collect its receivables and pay its
trade payables in the ordinary course of business. Company and Shareholders
shall not introduce any new method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra
and its authorized representatives access to, and make available for
inspection, all of the assets and business of Company, the Business and the
Assets, including employees, customers and suppliers and permit Pentegra and
its authorized representatives to inspect and make copies of all documents,
records and information with respect to the business or assets of Company,
the Business or the Assets as Pentegra or its representatives may request.
Company and Shareholders shall promptly notify Pentegra in writing of (a) any
notice or communication relating to a default or event that, with notice or
lapse of time or both, could become a default, under any contract, commitment
or obligation to which Company is a party or relating to the Business or the
Assets, and (b) any adverse change in Company's or the Business' financial
condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and
Shareholders shall use their best efforts to secure all necessary approvals
and consents of third parties to the consummation of the transactions
contemplated hereby, including consents described on EXHIBIT 2.4. Company
and Shareholders shall use their best efforts to obtain all licenses,
permits, approvals or other authorizations required under any law, rule,
regulation, or otherwise to provide the services of the Practice contemplated
by the Service Agreement and to conduct the intended business of the Practice
and operate the Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance
with the provisions hereof, Company and Shareholders shall not, and shall use
its best efforts to cause Company's employees, agents and representatives not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or
the making or implementation of any proposal or offer, including without
limitation, any proposal or offer to any Shareholder, with respect to a
merger, acquisition, consolidation or similar transaction involving, or the
purchase of all or any significant portion of the assets or any equity
securities of Company or engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person relating to such proposal or offer, and Company and Shareholders will
immediately cease any such activities, discussions or negotiations heretofore
conducted with respect to any of the foregoing. Company and Shareholders
shall immediately notify Pentegra if any such inquiries or proposals are
received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Company or any entity might have any liability whatsoever
arising from any insurance, pension plan, employment tax or similar
liability of Company to any employee or other person or entity (including,
without limitation, any Company Plan and any liability under employment
contracts with Company) allocable to services performed prior to the Closing
Date. Company and Shareholders acknowledge that the purpose and intent of
this covenant is to assure that Pentegra shall have no unfunded liability
whatsoever at any time after the Closing Date with respect to any of
Company's employees or similar persons or entities, including, without
limitation, any Company Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Company shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash
compensation of any Shareholder (other than in the ordinary course of
business) or other employee or an independent contractor of Company, adopt,
amend or terminate any compensation plan, employment agreement, independent
contractor agreement, employee policies and procedures or employee benefit
plan, take any action that could deplete the assets of any employee benefit,
or fail to pay any premium or contribution due or file any report with
respect to any employee benefit plan, or take any other actions with respect
to its employees or employee matters which might have an adverse effect upon
Company, its business, assets or prospects.
<PAGE>
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Company, nor will any repurchase of
any of Company's capital stock be approved or effected. The Company and
Shareholder shall cause the amendment of the Articles of Incorporation of the
Company to change the purpose of the corporation from the practice of
dentistry to general corporate purposes and execute all necessary
documentation to evidence such amendment in order to effectuate the
reorganization contemplated hereby.
4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders
shall use their best efforts to take, or cause to be taken, all actions
necessary to effect the reorganization contemplated hereby under applicable
law.
4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not
change in any material respect the tax or financial accounting methods or
practices followed by Company (including any material change in any
assumption underlying, or any method of calculating, any bad debt,
contingency or other reserve), except as may be required by law or generally
accepted accounting principles. Company and Shareholders will duly,
accurately and timely (without regard to any extensions of time) file all
returns, information statements and other documents relating to taxes of
Company required to be filed by it, and pay all taxes required to be paid by
it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Company hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Company and Shareholders covenant and agree that all of the
creditors with respect to the Business and the Assets will be paid in full by
Company prior to the Closing Date, except to extent that any liability to
such creditors is assumed by Pentegra pursuant to this Agreement. If
required by Pentegra, Company and Shareholders shall furnish Pentegra with
proof of payment of all creditors with respect to the Business and the
Assets. Notwithstanding the foregoing, Company and Shareholders may dispute
the validity or amount of any such creditor's claim without being deemed to
be in violation of this SECTION 4.11, provided that such dispute is in good
faith and does not unreasonably delay the resolution of the claim and
provided, further that Company and Shareholders agree to indemnify and bond
Pentegra for such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Company leases any of its premises from any Shareholder
or other affiliate of Company or any shareholder of Company, Pentegra shall
have entered into a building lease (the "Building Lease") with the owner of
such premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, (i) a five year
initial term plus three five-year renewal options, (ii) a lease rate equal to
the fair market value lease rate, as agreed to by Pentegra, and (iii) such
other provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with
all requests made by Pentegra for the purpose of allowing Pentegra to hire
those non-dentist employees of Company designated by Pentegra, such
employment to be effective as of the Closing Date. Notwithstanding the
above, Company and Shareholders shall remain liable under any Company Plans
for any claims incurred by any employees or their spouses or dependents, and
for all compensation, bonuses, benefits and other such items and other
liabilities related to Company's employees incurred by Company prior to the
Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all
employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall
be treated as "leased employees" (as defined in Code Section 414(n)) of
Company and shall be treated as Clinic employees for purposes of eligibility
and participation in Company Plans.
4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be
named as an additional
<PAGE>
insured on its liability insurance programs, effective as of the Closing
Date.
4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a
limited liability company, partnership or other legal entity (the "Practice")
approved by Pentegra for the purpose of practicing dentistry and entering
into the Service Agreement. The Practice shall be duly organized, in
existing and in good standing under the laws of the State in which the
practice of dentistry is conducted by the Shareholders and the Practice. The
Practice shall have all necessary power to own all of its assets and to carry
on its business as such business is now being conducted. The Shareholders
shall be the sole member/shareholder/partner of the Practice and own all such
interests free of all security interests, claims, encumbrances and liens.
Each interest in the Practice shall be legally and validly issued and fully
paid and nonassessable. There shall be no outstanding (a) bonds, debentures,
notes or other obligations the holders of which have the right to vote with
the members/partners/shareholders of the Practice on any matter, (b)
securities of the Practice convertible into equity interests in the Practice,
or (c) commitments, options, rights or warrants to issue any such equity
interests in the Practice, to issue securities of the Practice convertible
into such equity interests, or to redeem any securities of the Practice. No
interests of the Practice shall have been issued or disposed of in violation
of the preemptive rights, rights of first refusal or similar rights of any of
the Practice's members/partners/shareholders. The Practice shall quality to
do business as a foreign entity in any other state or jurisdiction by reason
of its business, properties or activities in or relating to such other state
or jurisdiction. The Company shall have transferred the Excluded Assets set
forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to
assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for
equity interest in the Practice, and the Company shall have distributed such
equity interests in the Practice to the Shareholders.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation,
Bylaws/Regulations and minutes of the Practice and all amendments thereto of
the Practice shall have been delivered to Pentegra and shall be in form and
substance satisfactory to Pentegra. The minute books of the Practice shall
contain all accurate minutes of the meetings of and consents to actions taken
without meetings of the members\managers/partners/board of directors of the
Practice since its formation. The books of account of the Practice shall
have been kept accurately in the ordinary course of business and the
revenues, expenses, assets and liabilities of the Practice shall have been
properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements
and other documents to be executed and delivered by it pursuant to this
Agreement, including without limitation, the Service Agreement and each
Employment Agreement or to be executed and delivered on the Closing Date, and
has taken all action required by law, its Organization/Partnership
Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to
authorize the execution, delivery and performance of such documents. The
Service Agreement, the Employment Agreement and the other agreements
contemplated hereby shall have been duly executed and delivered by the
Practice and constitute or will constitute the legal, valid and binding
obligations of the Practice enforceable against the Practice in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of the
Service Agreement, the Employment Agreements and the other agreements
contemplated hereby will not violate any provision of the organizational
documents of the Practice or any provisions of, or result in the acceleration
of, any obligation under any mortgage, lien, lease, agreement, rent,
instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any
material restrictions of any kind to which the Practice is subject, or result
in any lien or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment
<PAGE>
Agreements, the Practice shall not be a party to or subject to any agreement,
indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and have filed with
the proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS.
Pentegra, Shareholders and Company agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall
cooperate to promptly prepare and file with the Securities Exchange
Commission ("SEC") the Registration Statement on Form S-1 (or other
appropriate Form) to be filed by Pentegra in connection with its Initial
Public Offering (including the prospectus constituting a part thereof, the
"Registration Statement"). Pentegra shall obtain all necessary state
securities laws or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement and the Company and Shareholders
shall furnish all information concerning Company and Shareholders as may be
reasonable requested in connection with any such action.
Company and Shareholder represent and warrant that none of the
information or documents supplied or to be supplied by it specifically for
inclusion in the Registration Statement, by exhibit or otherwise, will, at
the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act of 1933, 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, in
light of the circumstances under which they were made, not misleading.
Company and Shareholders shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.
Company and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by
Pentegra in connection with the preparation of the Registration Statement and
each amendment or supplement thereto, or any other statement, filing, notice
or application made by or on behalf of each such party or any of its
subsidiaries to any governmental entity in connection with the transactions
contemplated by the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of
<PAGE>
the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Company and Shareholders contained herein shall have been true and correct
in all respects when initially made and shall be true and correct in all
respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Company and Shareholders prior
to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Company shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Company, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service
Agreement"), in substantially the form attached hereto as EXHIBIT 7.7,
pursuant to which Pentegra will provide management services to the Practice.
Each Shareholder shall have executed and delivered a Guaranty Agreement in
substantially the form attached as EXHIBIT 4.10 of the Service Agreement
pursuant to which Shareholder shall, among other things, guaranty the
obligations of the Practice under the Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused
each shareholder of Company that has an existing employment agreement with
Company to have terminated his or her employment agreement with Company and
shall have executed an employment agreement ("Employment Agreement") with the
Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise
satisfactory to Company and Pentegra.
7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have
obtained all necessary government and other third-party approvals and
consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables
or payables between Company and its shareholders or affiliates and Company
shall not have any liabilities, including indebtedness, guaranties and
capital leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an
additional insured on their liability insurance program in accordance with
SECTION 4.15.
<PAGE>
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Company since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Company and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pentegra contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Company shall have received all documents, duly
executed in form satisfactory to Company and its counsel, referred to in
SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days
after requested by Pentegra, Company and Shareholders shall deliver to
Pentegra the following, all of which shall be in a form satisfactory to
counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel
for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or
letter agreement in form and substance mutually acceptable to the parties
hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to
<PAGE>
therein;
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of Company
authorizing the execution, delivery and performance of this Agreement, the
Service Agreement, the Employment Agreements and all related documents and
agreements each certified by the Secretary as being true and correct copies
of the original thereof;
(d) executed merger certificate and/or plan as required by
applicable state law;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra and the original stock certificates
together with blank stock powers representing the outstanding shares of
Company common stock;
(f) certificates of the Shareholders and a duly authorized officer
of Company dated as of the Closing Date, (i) as to the truth and correctness
of the representations and warranties of Company and Shareholder contained
herein; (ii) as to the performance of and compliance by Company and
Shareholder with all covenants contained herein; and (iii) certifying that
all conditions precedent of Company and Shareholders to the Closing have been
satisfied;
(g) a certificate of the Secretary of Company certifying as to the
incumbency of the directors and officers of Company and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Company;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Company and any state of required
foreign qualification of Company establishing that Company is in existence
and is in good standing to transact business in its state of incorporation;
(i) an opinion of counsel to Company and Shareholder opining as to
the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Company, the enforceability of this Agreement and the other agreements and
documents to be executed in connection herewith, and other matters reasonably
requested by Pentegra;
(j) non-foreign affidavits executed by Company;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Company and Shareholders, the following, all of which shall
be in a form satisfactory to counsel to Company and Shareholders and shall be
held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending
Closing, pursuant to an escrow agreement or letter agreement in form and
substance mutually acceptable to the parties hereto:
<PAGE>
(a) the Merger Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Company;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Company;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Company to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit attached hereto, any agreement executed pursuant hereto, and
any certificate executed and delivered by any party pursuant to the terms of
this Agreement, shall constitute representations and warranties of Company
and Shareholders, jointly and severally, or of Pentegra, as the case may be.
All such representations and warranties, and all representations and
warranties expressly labeled as such in this Agreement shall survive the date
of this Agreement and the Closing Date for a period of five (5) years
following the Closing Date, except that (i) the representations and
warranties with respect to environmental and medical waste laws and health
care laws and matters shall survive for a period of fifteen (15) years and
tax representations shall survive until one year after the expiration of the
applicable statute of limitations. Each party covenants with the other
parties not to make any claim with respect to such representations and
warranties, against any party after the date on which such survival period
shall terminate. No party shall be entitled to claim indemnity from any
other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has
timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the
case may be. Each party hereby releases, acquits and discharges the other
party from any and all claims and demands, actions and causes of action,
damages, costs,
<PAGE>
expenses and rights of setoff with respect to which the notices required by
SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH
OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS
SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED
PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES,
ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED
TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM
OR BY REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR
TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION
10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND
SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS,
DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING,
INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT
APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST
ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS,
DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY,
<PAGE>
AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO
BE FURNISHED BY INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR
AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL
LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION
ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS
RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER
THE CLOSING DATE,
(E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY
RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A
RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH
THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS
SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS
SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE
REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO
MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
<PAGE>
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the
defense of such action or proceeding, such Indemnified Person shall notify
Indemnitor thereof. If any such action or other proceeding shall be brought
against any Indemnified Person, Indemnitor shall, upon written notice given
within a reasonable time following receipt by Indemnitor of such notice from
Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Company or any Shareholder giving
rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra
shall be entitled to offset the amount of damages incurred by it as a result
of such breach of warranty, representation, covenant or agreement against any
amounts payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Company
or any Shareholder contained in this Agreement or in any certificate or other
document executed and delivered by Company or any Shareholder pursuant to
this Agreement is or becomes untrue or breached in any material respect or if
Company or any Shareholder fails to comply in any material respect with any
covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
(c) at any time by Company or any Shareholder if any representation or
warranty of Pentegra contained in this Agreement or in any certificate or
other document executed and delivered by Pentegra pursuant to this Agreement
is or becomes untrue or breached in any material respect or if Pentegra fails
to comply in any material respect with any covenant or agreement contained
herein and such misrepresentation, noncompliance or breach is not cured,
waived or eliminated within twenty (20) days after receipt of written notice
thereof;
(d) by Pentegra, Shareholders or Company if the transaction contemplated
hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the
<PAGE>
result of its legal, financial and operational due diligence with respect to
Company, that such termination is desirable and in the best interests of
Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares
of Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer
shall be treated as effective for any purpose or (b) engage in any
transaction, whether or not with respect to any shares of Pentegra Common
Stock or any interest therein, the intent or effect of which is to reduce the
risk of owning shares of Pentegra Common Stock. The certificates evidencing
the Pentegra Common Stock delivered to Company pursuant to the terms hereof
will bear a legend substantially in the form set forth below and containing
such other information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the
shares of Pentegra Common Stock to be delivered to Company pursuant to this
Agreement have not been and will not be registered under the Securities Act
of 1933 and may not be resold without compliance with the Securities Act of
1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to
this Agreement is being acquired solely for its own account, for investment
purposes only and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution. Each
Shareholder covenants, warrants and represents that none of the shares of
Pentegra Common Stock issued to it will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the Securities Act, as
amended, and the rules and regulations of the Securities Exchange Commission
and applicable state securities laws and regulations. All certificates
evidencing shares of Pentegra Common Stock shall bear the following legend in
addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock
shall bear any legend required by the securities or blue sky laws of any
state where Company resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the
economic risk of an investment in Pentegra Common Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and
have such knowledge and experience in financial and business matters that
they are capable of evaluating the merits and risks of the proposed
investment and therefore have the capacity to protect their own interests in
connection with the acquisition of the Pentegra Common Stock. Shareholders
and their representatives have had an adequate opportunity to ask questions
and receive answers from the
<PAGE>
officers of Pentegra concerning any and all matters relating to the
background and experience of the officers and directors of Pentegra, the
plans for the operations of the business of Pentegra, and any plans for
additional acquisitions and the like. Shareholders and their representatives
have asked any and all questions in the nature described in the preceding
sentence and all questions have been answered to their satisfaction.
Shareholders are "accredited investors" as defined in Regulation D of the
Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Company and Shareholders agree that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally
through no fault of Company or Shareholders, (ii) disclosure is required by
law or the order of any governmental authority under color of law, provided,
that prior to disclosing any information pursuant to this clause (ii),
Company and Shareholders shall, if possible, give prior written notice
thereof to the other parties hereto, and provide such other parties hereto
with the opportunity to contest such disclosure, (iii) Company and
Shareholders reasonably believe that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party, or
(iv) Company and Shareholders are the sole and exclusive owner of such
confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Company or Shareholders of the provisions of this SECTION 13, Pentegra shall
be entitled to an injunction restraining Company and Shareholders from
disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Pentegra from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. The obligations of the parties under this SECTION 13 shall
survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement will qualify as a reorganization within the meaning of
Section 368(a) of the Code. The tax returns (and schedules thereto) of
Shareholders, Company and Pentegra shall be filed in a manner consistent
with such intention and Shareholders and Pentegra shall each provide the
other with such tax information, reports, returns or schedules as may be
reasonably required to assist the other in so reporting the transactions
contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
<PAGE>
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Company and Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Company or any Shareholder for services
rendered in connection with negotiating and closing the transactions
contemplated by this Agreement or the documents to be executed in connection
herewith, whether or not such costs or expenses are incurred before or after
the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Company.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
<PAGE>
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one and the
same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Company, be relieved from its obligations
to Company under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Company, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Company and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Company or may demand from Company, and Company agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Companys or Shareholders (hereinafter referred to as a "Party"), whether made
before or after the institution of any legal proceeding, any dispute among
the parties hereto in any way arising out of, related to, or in connection
with this Agreement (hereinafter a "Dispute"), shall be resolved by binding
arbitration in accordance with the terms of this Section (hereinafter the
"Arbitration Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American
<PAGE>
Arbitration Association (the "AAA") in accordance with the terms of this
Arbitration Program, the Commercial Arbitration Rules of the AAA. In the
event of any inconsistency between this Arbitration Program and those rules
or statutes, then the terms of this Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or foreclosing upon any
personal property in which there has been granted a security interest or lien
by a Party in the Documents. In Disputes involving indebtedness or other
monetary obligations, each Party agrees that the other Party may proceed
against all liable persons, jointly and severally against one or more of
them, without impairing rights against other liable persons. Nor shall a
Party be required to join the principal obligor or any other liable persons
(e.g., sureties or guarantors) in any proceeding against a particular person.
A Party may release or settle with one or more liable persons as the Party
deems fit without releasing or impairing rights to proceed against any
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoeniz,
Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the
<PAGE>
ordinary course of business of the Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
Y. PAUL SUZUKI, D.D.S., P.S.
By: /s/ Y. Paul Suzuki, D.D.S.
-----------------------------------------
Y. Paul Suzuki, D.D.S., President
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
----------------------------------------
Its: Senior VP
----------------------------------------
/s/ Paul Suzuki, D.D.S.
--------------------------------------------
Paul Suzuki, D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
- ------- -----------
Annex I Merger Consideration
A Target Companies
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
4.16 Excluded Assets and Excluded Liabilities
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
AND
DONALD F. TAMBORELLO, D.D.S.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. . . . . . . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
2.1 EXISTENCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. . . . . . . . . . . . . 3
2.4 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 [INTENTIONALLY DELETED]. . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 [INTENTIONALLY DELETED]. . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 DENTIST'S FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . 3
2.8 LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 CONDITION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. . . . . . . . . . . . . . . . . . . 3
2.11 INVENTORIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. . . . . . . . . . . . . . . . . . . . 3
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES . . . . . . . . . . 4
2.14 LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.16 SUBSEQUENT EVENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.19 LIABILITIES; DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.20 INSURANCE POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.21 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.22 ADVERSE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.23 COMPLIANCE WITH LAWS IN GENERAL. . . . . . . . . . . . . . . . . . . . . . 7
2.24 THIRD PARTY PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.25 NO UNTRUE REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 7
2.26 BANKING RELATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS . . . . . . . . . . 8
2.28 PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING . . . . . . . . . . . . . . . . . . . . 8
3.2 POWER AND AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 NO UNTRUE REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4. COVENANTS OF DENTIST.
4.1 CONSUMMATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
4.2 BUSINESS OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 ACCESS AND NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. . . . . . . . . . . . 9
4.5 ACQUISITION PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . . . 9
4.7 EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 [INTENTIONALLY OMITTED]. . . . . . . . . . . . . . . . . . . . . . . . . .10
4.9 REQUIREMENTS TO EFFECT ACQUISITION . . . . . . . . . . . . . . . . . . . .10
4.10 ACCOUNTING AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . .10
4.11 WAIVER OF BULK TRANSFER COMPLIANCE . . . . . . . . . . . . . . . . . . . .10
4.12 LEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.13 HIRING OF EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.14 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.15 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.16 FORMATION OF THE PRACTICE. . . . . . . . . . . . . . . . . . . . . . . . .10
4.17 CORPORATE RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
4.18 POWER AND AUTHORITY FOR TRANSACTIONS . . . . . . . . . . . . . . . . . . .11
4.19 NO BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
4.20 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . .11
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. . . . . . . . . . . .11
Section 6. COVENANTS OF PENTEGRA AND DENTIST
6.1 FILINGS; OTHER ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . .12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . .12
7.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . .12
7.3 PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
7.4 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . . .12
7.5 DUE DILIGENCE REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . .12
7.6 APPROVAL BY THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . .12
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. . . . . . . . . . . . . . . . . . .13
7.8 EMPLOYMENT ARRANGEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . .13
7.9 CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . .13
7.10 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
7.11 DEBT AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . .13
7.12 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
7.13 NO CHANGE IN WORKING CAPITAL . . . . . . . . . . . . . . . . . . . . . . .13
7.14 SECURITIES APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Section 8. DENTIST'S CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . .13
8.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . .13
8.3 PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
8.4 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
8.5 SECURITIES APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Section 9. CLOSING DELIVERIES
<PAGE>
9.1 DELIVERIES OF DENTIST. . . . . . . . . . . . . . . . . . . . . . . . . . .14
9.2 DELIVERIES OF PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . . . .15
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
10.1 NATURE AND SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . .15
10.2 INDEMNIFICATION BY PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . .16
10.3 INDEMNIFICATION BY DENTIST . . . . . . . . . . . . . . . . . . . . . . . .16
10.4 INDEMNIFICATION PROCEDURE. . . . . . . . . . . . . . . . . . . . . . . . .17
10.5 RIGHT OF SETOFF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .18
12.2 INVESTMENTS; COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . . .19
12.3 ECONOMIC RISK; SOPHISTICATION. . . . . . . . . . . . . . . . . . . . . . .19
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . .20
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . .21
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . .21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . .21
14.12 NO RULE OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . . .21
14.13 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . .21
14.14 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
14.15 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . .21
14.16 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
</TABLE>
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed
as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra") and Donald F. Tamborello, D.D.S.
("Dentist").
WITNESSETH:
WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires
to receive from Dentist, certain assets of Dentist;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Dentist, the "Target Companies");
WHEREAS, it is intended for Federal income tax purposes that the
transfers contemplated by this Agreement, the Other Agreements and Pentegra's
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an
exchange within the meaning of Section 351 of the Internal Revenue Code of
1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and
conditions contained herein, on the Closing Date, Dentist shall convey,
transfer, deliver and assign to Pentegra or any affiliate of Pentegra
designated by Pentegra all of Dentist's right, title and interest in and to
those certain assets described on EXHIBIT 1.1 attached hereto (individually,
"Asset", and collectively "Assets"), free and clear of all obligations,
security interests, claims, liens and encumbrances, except as specifically
assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof.
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and
<PAGE>
contributed hereunder, and Dentist shall retain all of its right, title and
interest in and to, the assets not specifically transferred hereunder,
including without limitation, the assets described on EXHIBIT 1.2 (the
"Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Dentist
contained herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Dentist the consideration specified
in ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(B)
attached hereto to the extent that such obligations, commitments, liabilities
and indebtedness are current and not otherwise in default. (the "Assumed
Liabilities"). Notwithstanding any contrary provision contained herein,
Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i)
any liability, commitment or obligation or trade payable or indebtedness not
specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on
EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default
under such contracts, leases, commitments or obligations which occurred on or
before the Closing Date; (iii) any liability for any employee benefits
payable to employees of Dentist, including, but not limited to, liabilities
arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any
liability based upon or arising out of a violation of any antitrust or
similar restraint-of-trade laws by Dentist, including, without limiting the
generality of the foregoing, any such antitrust liability which may arise in
connection with agreements, contracts, commitments or orders for the sale of
goods or provision of services by Dentist reflected on the books of Dentist
at or prior to the Closing Date; (v) any liability based upon or arising out
of any tortious or wrongful actions of Dentist, any licensed professional
employee or independent contractor of Dentist, (vi) any liability for the
payment of any taxes of Dentist, including without limitation, sales, use and
other transfer taxes and income taxes arising from or by reason of the
transactions contemplated by this Agreement; (vii) any indebtedness secured
by deeds of trust or mortgages on real property; nor (viii) any liability
incurred or to be incurred pursuant to any malpractice or other suits or
actions pending against Dentist.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement, the
Dentist shall execute and deliver all such deeds, bills of sale, assignments
and assurances and take and do all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under the Assets in Pentegra or otherwise to carry
out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
Dentist hereby represents and warrants to Pentegra as follows:
2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the
State of Texas. Dentist does not have any assets, employees or offices in
any state other than the state set forth in the first sentence of this
SECTION 2.1.
2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into
and perform this
<PAGE>
Agreement and the other agreements to be executed and delivered in connection
herewith. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing
Date, duly executed and delivered by Dentist and constitute or will
constitute the legal, valid and binding obligations of Dentist in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of
this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and,
subject to the receipt of consents described on EXHIBIT 2.4, the consummation
of the actions contemplated hereby will not, result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Dentist is a party or
by which Dentist is bound, or violate any material restrictions of any kind
to which Dentist is subject, or result in any lien or encumbrance on any of
Dentist's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to
the knowledge of Dentist, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Dentist.
2.5 [INTENTIONALLY DELETED].
2.6 [INTENTIONALLY DELETED].
2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any
related unaudited statements of income, retained earnings, schedule of
accounts receivable, accounts payable and accrued liabilities, and cash flows
for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Dentist as of
the dates and for the periods indicated and reflect all fixed and contingent
liabilities of Dentist.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Dentist leases, as lessor or lessee, real or personal
property used in operating the Business, related to the Assets or otherwise.
All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance
with their respective terms, and there is not under any such lease any
existing default by Dentist, as lessor or lessee, or any condition or event
of which Dentist has knowledge which with notice or lapse of time, or both,
would constitute a default, in respect of which Dentist has not taken
adequate steps to cure such default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Dentist has no knowledge of any
latent defects therein.
<PAGE>
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances
set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to the Closing Date and evidence
of such releases of liens and claims shall be provided to Pentegra on the
Closing Date and the Assets shall not be used to satisfy such liens, claims
or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Dentist, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Dentist has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Dentist, including the names of any entities from whom Dentist previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Dentist in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Dentist has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the most recent payroll report of Dentist, showing
all current employees of Dentist and their current levels of compensation,
(b) promised increases in compensation of employees of Dentist that have not
yet been effected, (c) oral or written employment agreements, consulting
agreements or independent contractor agreements (and all amendments thereto)
to which Dentist is a party, copies of which have been delivered to Pentegra,
and (d) all employee manuals, materials, policies, procedures and
work-related rules, copies of which have been delivered to Pentegra. Dentist
is in compliance with all applicable laws, rules, regulations and ordinances
respecting employment and employment practices. Dentist has not engaged in
any unfair labor practice. There are no unfair labor practices charges or
complaints pending or threatened against Dentist, and Dentist has never been
a party to any agreement with any union, labor organization or collective
bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the
Assets is subject to any pending, nor does Dentist have knowledge of any
threatened, litigation, governmental investigation, condemnation or other
proceeding against or relating to or affecting Dentist, the Business, the
Assets or the transactions contemplated by this Agreement, and, to the
knowledge of Dentist, no basis for any such action exists, nor is there any
legal impediment of which Dentist has knowledge to the continued operation of
its business or the use of the Assets in the ordinary course, subject to
consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Dentist ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on
<PAGE>
such Exhibits, all of such Contracts are valid, binding and enforceable in
accordance with their terms and are in full force and effect, and no
defenses, offsets or counterclaims have been asserted or may be made by any
party thereto. Except as indicated on such Exhibits, there is not under any
such Contract any existing default by Dentist, or any condition or event of
which Dentist has knowledge which with notice or lapse of time, or both,
would constitute a default. Dentist has no knowledge of any default by any
other party to such Contracts. Dentist has not received notice of the
intention of any party to any Contract to cancel or terminate any Contract
and have no reason to believe that any amendment or change to any Contract is
contemplated by any party thereto. Other than those contracts, obligations
and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist
is not a party to any material written or oral agreement contract, lease or
arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
the Dentist, oral or written, that provide for prepayments or deferred
installment payments; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Dentist on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16,
Dentist has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) or entered into any contract, lease, license or
commitment, except in connection with the performance of this Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued, contingent
or otherwise) other than (i) liabilities shown or reflected on the Balance
Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary
course of business;
<PAGE>
(c) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
(d) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(e) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Dentist since the Balance Sheet
Date;
(f) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(g) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(h) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(i) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(j) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(k) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties,
assets or business or the Business or the Assets, or experienced any other
material adverse change in its financial condition, assets, prospects,
liabilities or business; or
(l) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Dentist has not received any notice that any tax deficiency or
delinquency has been or may be asserted against Dentist. There are no
audits relating to taxes of Dentist pending or in process or, to the
knowledge of Dentist, threatened. Dentist is not currently the beneficiary of
any waiver of any statute of limitations in respect of taxes nor of any
extension of time within which to file any tax return or to pay any tax
assessment or deficiency. There are no liens or encumbrances relating to
taxes on or threatened against any of the assets of Dentist. Dentist has
withheld and paid all taxes required by law to have been withheld and paid by
it. Neither Dentist nor any predecessor of Dentist is or has been a party to
any tax allocation or sharing agreement or a member of an affiliated group of
corporations filing a consolidated Federal income tax return. Dentist has
delivered to Pentegra correct and complete copies of Dentist's three most
recently filed annual state, local and Federal income tax returns, together
with all examination reports and statements of deficiencies assessed against
or agreed to by Dentist during the three calendar year period preceding the
date of this Agreement. Dentist has neither made any payments, is obligated
to make any payments, or is a party to any agreement that
<PAGE>
under any circumstance could obligate it to make any payments that will not
be deductible under Code section 280G.
(b) Dentist does not intend to dispose of any of the shares of Pentegra
Common Stock to be received hereunder and is not a party to any plan,
arrangement or agreement for the disposition of such shares. Nothing
contained herein shall prohibit Dentist from selling such shares of Pentegra
Common Stock after the designated holding period and in accordance with
SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated
by this Agreement which may be now or hereafter asserted against Pentegra,
Dentist resulting from any action taken by Dentist or their respective agents
or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Dentist did not have, as of the Balance Sheet
Date, and has not incurred since that date and will not have incurred as of
the Closing Date, any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
other than those incurred in the ordinary course of business or as set forth
on EXHIBIT 2.16. Dentist does not know, or have reasonable grounds to know,
of any basis for the assertion against Dentist as of the Balance Sheet Date,
of any claim or liability of any nature in any amount not fully reflected or
reserved against on the Balance Sheet, or of any claim or liability of any
nature arising since that date other than those incurred in the ordinary
course of business or contemplated by this Agreement. All indebtedness of
Dentist (including without limitation, indebtedness for borrowed money,
guaranties and capital lease obligations) is described on EXHIBIT 2.19
attached hereto.
2.20 INSURANCE POLICIES. Dentist and each licensed professional of
Dentist carries property, liability, malpractice, workers' compensation and
such other types of insurance as is customary in the industry. Valid and
enforceable policies in such amounts are outstanding and duly in force and
will remain duly in force through the Closing Date. All such policies are
described in EXHIBIT 2.20 attached hereto and true and correct copies have
been delivered to Pentegra. Dentist has not received notice or other
communication from the issuer of any such insurance policy cancelling or
amending such policy or threatening to do so. Neither Dentist nor any
licensed professional employee of Dentist has any outstanding claims,
settlements or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Dentist has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist
Plan," and collectively "Dentist Plans") have been operated and administered
in all material respects in accordance with all applicable laws, rules and
regulations, including without limitation, ERISA, the Internal Revenue Code
of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment
Act of 1967, as amended, and the related rules and regulations adopted by
those Federal agencies responsible for the administration of such laws. No
act or failure to act by Dentist has resulted in a "prohibited transaction"
(as defined in ERISA) with respect to the Dentist Plans. No "reportable
event" (as defined in ERISA) has occurred with respect to any of the Dentist
Plans. Dentist has not previously made, is not currently making, and is not
obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Dentist Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at
<PAGE>
least equal to the value of plan liabilities or (ii) the value of plan
liabilities in excess of plan assets is disclosed on the Balance Sheet, all
as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Dentist, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed
professional employees, and the conduct of the Business and use of the
Assets, have complied with all applicable laws, rules, regulations and
licensing requirements, including, without limitation, the Federal
Environmental Protection Act, the Occupational Safety and Health Act, the
Americans with Disabilities Act and any environmental laws and medical waste
laws, and there exist no violations by Dentist or any licensed professional
employee of Dentist of any Federal, state or local law or regulation.
Dentist has not received any notice of a violation of any Federal, state and
local laws, regulations and ordinances relating to the operations of the
Business and Assets and no notice of any pending inspection or violation of
any such law, regulation or ordinance has been received by Dentist.
2.24 THIRD PARTY PAYORS. Dentist and each licensed professional
employee or independent contractor of Dentist has timely filed all claims or
other reports required to be filed with respect to the purchase of services
by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are
no pending appeals, overpayment determinations, adjustments, challenges,
audit, litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Dentist and each
licensed professional employee of Dentist. Neither Dentist nor any licensed
professional employee of Dentist has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Dentist and Dentist's licensed professional employees has not (a) knowingly
and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist
in this Agreement, and no Exhibit or certificate issued or executed by, or
information furnished by Dentist or to be furnished by Dentist to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Dentist has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer
or employee or family member of Dentist, or their respective spouses,
children or affiliates, owns directly or indirectly, on an individual or
joint basis, any interest in, has a compensation or other financial
arrangement with, or
<PAGE>
serves as an officer or director of, any customer or supplier or competitor
of Dentist or any organization that has a material contract or arrangement
with Dentist.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Dentist's services which
accounted for more than 10% of revenues of Dentist in the preceding fiscal
year. Dentist has good relations with all such payors and other material
payors of Dentist and none of such payors has notified Dentist that it
intends to discontinue its relationship with Dentist or to deny any claims
submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Dentist as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would
not have a material adverse effect, there are no proceedings pending or, to
the knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has knowledge to the continued operation of its business or the use
of its Assets in the ordinary course.
<PAGE>
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Dentist pursuant
hereto, or in connection with the transactions contemplated hereby, contains
or will contain any untrue statement of a material fact, or omits or will
omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
SECTION 4. COVENANTS OF DENTIST.
Dentist agrees that between the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and conditions. Dentist agrees to complete the
Exhibits hereto to be provided by him in form and substance satisfactory to
Pentegra.
4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the
Assets in the ordinary course. Dentist shall not enter into any lease,
contract, indebtedness, commitment, purchase or sale or acquire or dispose of
any capital asset relating to the Business or the Assets except in the
ordinary course of business. Dentist shall use their best efforts to
preserve the Business and Assets intact and shall not take any action that
would have an adverse effect on the Business or Assets. Dentist shall use
their best efforts to preserve intact the relationships with payors,
customers, suppliers, patients and others having significant business
relations with Dentist. Dentist shall collect its receivables and pay its
trade payables in the ordinary course of business. Dentist shall not
introduce any new method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized
representatives access to, and make available for inspection, all of the
assets and business of Dentist, the Business and the Assets, including
employees, customers and suppliers and permit Pentegra and its authorized
representatives to inspect and make copies of all documents, records and
information with respect to the business or assets of Dentist, the Business
or the Assets as Pentegra or its representatives may request. Dentist shall
promptly
<PAGE>
notify Pentegra in writing of (a) any notice or communication relating to a
default or event that, with notice or lapse of time or both, could become a
default, under any contract, commitment or obligation to which Dentist is a
party or relating to the Business or the Assets, and (b) any adverse change
in Dentist's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall
use his best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby,
including consents described on EXHIBIT 2.4. Dentist shall use his best
efforts to obtain all licenses, permits, approvals or other authorizations
required under any law, rule, regulation, or otherwise to provide the
services of the Practice contemplated by the Service Agreement and to conduct
the intended business of the Practice and operate the Business and use the
Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance
with the provisions hereof, Dentist shall not, and shall use its best efforts
to cause Dentist's employees, agents and representatives not to, initiate,
solicit or encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer, including without limitation, any
proposal or offer to the Dentist, with respect to a merger, acquisition,
consolidation or similar transaction involving, or the purchase of all or any
significant portion of the assets or any equity securities of Dentist or
engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to
such proposal or offer, and Dentist will immediately cease any such
activities, discussions or negotiations heretofore conducted with respect to
any of the foregoing. Dentist shall immediately notify Pentegra if any such
inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Dentist or any entity might have any liability whatsoever
arising from any insurance, pension plan, employment tax or similar
liability of Dentist to any employee or other person or entity (including,
without limitation, any Dentist Plan and any liability under employment
contracts with Dentist) allocable to services performed prior to the Closing
Date. Dentist acknowledges that the purpose and intent of this covenant is
to assure that Pentegra shall have no liability whatsoever at any time after
the Closing Date with respect to any of Dentist's employees or similar
persons or entities, including, without limitation, any Dentist Plan for the
period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash
compensation of the Dentist (other than in the ordinary course of business)
or other employee or an independent contractor of Dentist, adopt, amend or
terminate any compensation plan, employment agreement, independent contractor
agreement, employee policies and procedures or employee benefit plan, take
any action that could deplete the assets of any employee benefit, or fail to
pay any premium or contribution due or file any report with respect to any
employee benefit plan, or take any other actions with respect to its
employees or employee matters which might have an adverse effect upon
Dentist, its business, assets or prospects.
4.8 [INTENTIONALLY OMITTED].
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best
efforts to take, or cause to be taken, all actions necessary to effect the
acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material
respect the tax or financial accounting methods or practices followed by
Dentist (including any material change in any assumption underlying, or any
method of calculating, any bad debt, contingency or other reserve), except
<PAGE>
as may be required by law or generally accepted accounting principles.
Dentist will duly, accurately and timely (without regard to any extensions of
time) file all returns, information statements and other documents relating
to taxes of Dentist required to be filed by it, and pay all taxes required to
be paid by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby
waive any compliance with the applicable state Bulk Transfers Act, if any.
Dentist covenants and agrees that all of the creditors with respect to the
Business and the Assets will be paid in full by Dentist prior to the Closing
Date, except to extent that any liability to such creditors is assumed by
Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall
furnish Pentegra with proof of payment of all creditors with respect to the
Business and the Assets. Notwithstanding the foregoing, Dentist may dispute
the validity or amount of any such creditor's claim without being deemed to
be in violation of this SECTION 4.11, provided that such dispute is in good
faith and does not unreasonably delay the resolution of the claim and
provided, further that Dentist agrees to indemnify and bond Pentegra for such
amounts as is satisfactory to Pentegra.
4.12 LEASE. If Dentist leases any of its premises from the Dentist or
other affiliate of Dentist, Pentegra shall have entered into a building lease
(the "Building Lease") with the owner of such premises on terms and
conditions satisfactory to Pentegra, the terms and conditions of which shall
include, without limitation, (i) a five year initial term plus three
five-year renewal options, (ii) a lease rate equal to the fair market value
lease rate, as agreed to by Pentegra, and (iii) such other provisions to be
acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made
by Pentegra for the purpose of allowing Pentegra to hire those non-dental
employees of Dentist designated by Pentegra, such employment to be effective
as of the Closing Date. Notwithstanding the above, Dentist shall remain
liable under any Dentist Plans for any claims incurred by any employees or
their spouses or dependents, and for all compensation, bonuses, benefits and
other such items and other liabilities related to Dentist's employees
incurred by Dentist prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all
employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall
be treated as "leased employees" (as defined in Code Section 414(n)) of
Dentist and shall be treated as Clinic employees for purposes of eligibility
and participation in Dentist Plans.
4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective
as of the Closing Date.
4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited
liability company, partnership or other legal entity (the "Practice")
approved by Pentegra for the purpose of practicing dentistry and entering
into the Service Agreement. The Practice shall be duly organized, in
existing and in good standing under the laws of the State in which the
Dentist and the Practice are to practice dentistry. The Practice shall have
all necessary power to own all of its assets and to carry on its business as
such business is now being conducted. The Dentist shall be the sole
member/shareholder/partner of the Practice and own all such interests free of
all security interests, claims, encumbrances and liens. Each interest in the
Practice shall be legally and validly issued and fully paid and
nonassessable. There shall be no outstanding (a) bonds, debentures, notes or
other obligations the holders of which have the right to vote with the
members/partners/shareholders of the Practice on any matter, (b) securities
of the Practice convertible into equity interests in the Practice, or (c)
commitments, options, rights or warrants to issue any such equity interests
in the Practice, to issue securities of the Practice convertible into such
equity interests, or to redeem any securities of the Practice. No interests
of the Practice shall have been issued or disposed of in violation of
<PAGE>
the preemptive rights, rights of first refusal or similar rights of any of
the Practice's members/partners/shareholders. The Practice shall quality to
do business as a foreign entity in any other state or jurisdiction by reason
of its business, properties or activities in or relating to such other state
or jurisdiction.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation,
Bylaws/Regulations and minutes of the Practice and all amendments thereto of
the Practice shall have been delivered to Pentegra and shall be in form and
substance satisfactory to Pentegra. The minute books of the Practice shall
contain all accurate minutes of the meetings of and consents to actions taken
without meetings of the members\managers/partners/board of directors of the
Practice since its formation. The books of account of the Practice shall
have been kept accurately in the ordinary course of business and the
revenues, expenses, assets and liabilities of the Practice shall have been
properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements
and other documents to be executed and delivered by it pursuant to this
Agreement, including without limitation, the Service Agreement and each
Employment Agreement or to be executed and delivered on the Closing Date, and
has taken all action required by law, its Organization/Partnership
Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to
authorize the execution, delivery and performance of such documents. The
Service Agreement, the Employment Agreement and the other agreements
contemplated hereby shall have been duly executed and delivered by the
Practice and constitute or will constitute the legal, valid and binding
obligations of the Practice enforceable against the Practice in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of the
Service Agreement, the Employment Agreements and the other agreements
contemplated hereby will not violate any provision of the organizational
documents of the Practice or any provisions of, or result in the acceleration
of, any obligation under any mortgage, lien, lease, agreement, rent,
instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any
material restrictions of any kind to which the Practice is subject, or result
in any lien or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and has filed with
the proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
<PAGE>
SECTION 6. COVENANTS OF PENTEGRA AND DENTIST.
Pentegra and Dentist agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to
promptly prepare and file with the Securities Exchange Commission ("SEC") the
Registration Statement on Form S-1 (or other appropriate Form) to be filed by
Pentegra in connection with its Initial Public Offering (including the
prospectus constituting a part thereof, the "Registration Statement"). Pentegra
shall obtain all necessary state securities laws or "Blue Sky" permits and
approvals required to carry out the transactions contemplated by this Agreement
and the Dentist shall furnish all information concerning Dentist as may be
reasonable requested in connection with any such action.
Dentist represents and warrants that none of the information or documents
supplied or to be supplied by it specifically for inclusion in the Registration
Statement, by exhibit or otherwise, will, at the time the Registration Statement
and each amendment or supplement thereto, if any, becomes effective under the
Securities Act of 1933, 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, in light of the circumstances under which they were
made, not misleading. Dentist shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.
Dentist shall furnish Pentegra will all information concerning itself and
such other matters as may be reasonable requested by Pentegra in connection with
the preparation of the Registration Statement and each amendment or supplement
thereto, or any other statement, filing, notice or application made by or on
behalf of each such party or any of its subsidiaries to any governmental entity
in connection with the transactions contemplated by the Other Agreements or this
Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at or
prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Dentist contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Dentist prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Dentist shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Dentist, the Business and the Assets, the results of which shall
be satisfactory to Pentegra in its sole discretion.
<PAGE>
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service Agreement"),
in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which
Pentegra will provide management services to the Practice. Dentist shall have
executed and delivered a Guaranty Agreement in substantially the form attached
as EXHIBIT 4.10 of the Service Agreement pursuant to which Dentist shall, among
other things, guaranty the obligations of the Practice under the Service
Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her
employment agreement and executed an employment agreement ("Employment
Agreement") with the Practice in form and substance attached hereto as EXHIBIT
7.8 and otherwise satisfactory to Dentist and Pentegra.
7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary
government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly
executed in form satisfactory to Pentegra and its counsel, referred to in
SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or
payables between Dentist and its affiliates and Dentist shall not have any
liabilities, including indebtedness, guaranties and capital leases, that are not
set forth on EXHIBIT 2.19.
7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured
on its liability insurance program in accordance with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Dentist since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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.
At or prior to the date that the Registration Statement is declared effective by
the SEC, Pentegra shall have received all state securities and "Blue Sky"
permits necessary to consummate the transactions contemplated hereby. The
Pentegra Common Stock shall have been approved for listing on Nasdaq or other
exchange selected by Pentegra, subject only to official notification of
issuance.
SECTION 8. DENTIST'S CONDITIONS PRECEDENT.
The obligations of Dentist hereunder are subject to fulfillment at or prior
to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Pentegra contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Pentegra prior to the Closing Date.
<PAGE>
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly
executed in form satisfactory to Dentist and its counsel, referred to in SECTION
9.2.
8.5 SECURITIES APPROVAL. 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.
At or prior to the date that the Registration Statement is declared effective by
the SEC, Pentegra shall have received all state securities and "Blue Sky"
permits necessary to consummate the transactions contemplated hereby. The
Pentegra Common Stock shall have been approved for listing on Nasdaq or other
exchange selected by Pentegra, subject only to official notification of
issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF DENTIST. Within five business days after requested by
Pentegra, Dentist shall deliver to Pentegra the following, all of which shall be
in a form satisfactory to counsel to Pentegra and shall be held by Jackson &
Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an
escrow agreement or letter agreement in form and substance mutually acceptable
to the parties hereto:
(a) an executed original Service Agreement and executed originals of
all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a bill of sale conveying the Assets to Pentegra;
(d) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(e) certificates of Dentist dated as of the Closing Date, (i) as to
the truth and correctness of the representations and warranties of Dentist
contained herein; (ii) as to the performance of and compliance by Dentist with
all covenants contained herein; and (iii) certifying that all conditions
precedent of Dentist to the Closing have been satisfied;
(f) an opinion of counsel to Dentist opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Dentist, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Pentegra;
(g) non-foreign affidavits executed by Dentist;
(h) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(i) an executed Registration Rights Agreement between Pentegra and
Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
<PAGE>
(j) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall
deliver to Dentist the following, all of which shall be in a form satisfactory
to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for
Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter
agreement in form and substance mutually acceptable to the parties hereto:
(a) the Acquisition Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance of
this Agreement and all related documents and agreements each certified by the
Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii) certifying
that all conditions precedent of Pentegra to the Closing have been satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and the
State of incorporation of Dentist;
(h) an opinion of counsel to Pentegra opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Pentegra, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Dentist;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Dentist to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in
any Exhibit attached hereto, any agreement executed pursuant hereto, and any
certificate executed and delivered by any party pursuant to the terms of this
Agreement, shall constitute representations and warranties of Dentist or
<PAGE>
of Pentegra, as the case may be. All such representations and warranties, and
all representations and warranties expressly labeled as such in this Agreement
shall survive the date of this Agreement and the Closing Date for a period of
five (5) years following the Closing Date, except that (i) the representations
and warranties with respect to environmental and medical waste laws and health
care laws and matters shall survive for a period of fifteen (15) years and tax
representations shall survive until one year after the expiration of the
applicable statute of limitations. Each party covenants with the other parties
not to make any claim with respect to such representations and warranties,
against any party after the date on which such survival period shall terminate.
No party shall be entitled to claim indemnity from any other party pursuant to
SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice
required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party
hereby releases, acquits and discharges the other party from any and all claims
and demands, actions and causes of action, damages, costs, expenses and rights
of setoff with respect to which the notices required by SECTION 10.2, 10.3 or
10.4, as applicable, are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION
10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES
(INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL
THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY
PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF,
OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION 10.3
<PAGE>
AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND
HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND
EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS
SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED
PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS,
DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT
LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL)
ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR AFTER
THE CLOSING DATE,
(D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE
FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING
FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY
PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR
AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION,
PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE
OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS
COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS,
THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE
<PAGE>
THEREIN A MATERIAL FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS
NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the defense
of such action or proceeding, such Indemnified Person shall notify Indemnitor
thereof. If any such action or other proceeding shall be brought against any
Indemnified Person, Indemnitor shall, upon written notice given within a
reasonable time following receipt by Indemnitor of such notice from Indemnified
Person, be entitled to assume the defense of such action or proceeding with
counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person;
provided, however, that any Indemnified Person may at its own expense retain
separate counsel to participate in such defense. Notwithstanding the foregoing,
Indemnified Person shall have the right to employ separate counsel at
Indemnitor's expense and to control its own defense of such action or proceeding
if, in the reasonable opinion of counsel to such Indemnified Person, (a) there
are or may be legal defenses available to such Indemnified Person or to other
Indemnified Persons that are different from or additional to those available to
Indemnitor and which could not be adequately advanced by counsel chosen by
Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor
and such Indemnified Person that would make such separate representation
advisable; provided, however, that in no event shall Indemnitor be required to
pay fees and expenses hereunder for more than one firm of attorneys of
Indemnified Person in any jurisdiction in any one action or proceeding or group
of related actions or proceedings. Indemnitor shall not, without the prior
written consent of any Indemnified Person, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding to which such Indemnified Person is a party unless such settlement,
compromise or consent includes an unconditional release of such Indemnified
Person from all liability arising or potentially arising from or by reason of
such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Dentist giving rise to indemnification
under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset
the amount of damages incurred by it as a result of such breach of warranty,
representation, covenant or agreement against any amounts payable by Pentegra,
including the amounts payable under the Service Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Dentist
contained in this Agreement or in any certificate or other document executed and
delivered by Dentist pursuant to this Agreement is or becomes untrue or breached
in any material respect or if Dentist fails to comply in any material respect
with any covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
(c) at any time by Dentist if any representation or warranty of Pentegra
contained in this Agreement or
<PAGE>
in any certificate or other document executed and delivered by Pentegra
pursuant to this Agreement is or becomes untrue or breached in any material
respect or if Pentegra fails to comply in any material respect with any
covenant or agreement contained herein and such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
(d) by Pentegra or Dentist if the transaction contemplated hereby shall
not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Dentist, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date,
Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber,
pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra
Common Stock received by such party hereunder, (ii) any interest (including
without limitation, an option to buy or sell) in any shares of Pentegra Common
Stock, in whole or in part, and no such attempted transfer shall be treated as
effective for any purpose or (b) engage in any transaction, whether or not with
respect to any shares of Pentegra Common Stock or any interest therein, the
intent or effect of which is to reduce the risk of owning shares of Pentegra
Common Stock. The certificates evidencing the Pentegra Common Stock delivered
to Dentist pursuant to the terms hereof will bear a legend substantially in the
form set forth below and containing such other information as Pentegra may deem
necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the
shares of Pentegra Common Stock to be delivered to Dentist pursuant to this
Agreement have not been and will not be registered under the Securities Act of
1933 and may not be resold without compliance with the Securities Act of 1933.
The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement
is being acquired solely for its own account, for investment purposes only and
with no present intention of distributing, selling or otherwise disposing of it
in connection with a distribution. Dentist covenants, warrants and represents
that none of the shares of Pentegra Common Stock issued to it will be offered,
sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
except after full compliance with all of the applicable provisions of the
Securities Act, as amended, and the rules and regulations of the Securities
Exchange Commission and applicable state securities laws and regulations. All
certificates evidencing shares of Pentegra Common Stock shall bear the following
legend in addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
<PAGE>
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Dentist resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic
risk of an investment in Pentegra Common Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and has such
knowledge and experience in financial and business matters that they are capable
of evaluating the merits and risks of the proposed investment and therefore have
the capacity to protect its own interests in connection with the acquisition of
the Pentegra Common Stock. Dentist and its representatives have had an adequate
opportunity to ask questions and receive answers from the officers of Pentegra
concerning any and all matters relating to the background and experience of the
officers and directors of Pentegra, the plans for the operations of the business
of Pentegra, and any plans for additional acquisitions and the like. Dentist
and its representatives have asked any and all questions in the nature described
in the preceding sentence and all questions have been answered to their
satisfaction. Dentist is an "accredited investors" as defined in Regulation D
of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes
and acknowledges that it had in the past, currently have, and in the future may
possibly have, access to certain confidential information of Pentegra that is
valuable, special and unique assets of Pentegra's businesses. Dentist agrees
that it will not disclose such confidential information to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
unless (i) such information becomes available to or known by the public
generally through no fault of Dentist, (ii) disclosure is required by law or
the order of any governmental authority under color of law, provided, that
prior to disclosing any information pursuant to this clause (ii), Dentist
shall, if possible, give prior written notice thereof to the other parties
hereto, and provide such other parties hereto with the opportunity to contest
such disclosure, (iii) Dentist reasonably believes that such disclosure is
required in connection with the defense of a lawsuit against the disclosing
party, or (iv) Dentist is the sole and exclusive owner of such confidential
information as a result of the transactions contemplated hereunder or
otherwise. In the event of a breach or threatened breach by Dentist of the
provisions of this SECTION 13, Pentegra shall be entitled to an injunction
restraining Dentist from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting Pentegra from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages. The obligations of the parties under this
SECTION 13 shall survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement, together with the transactions contemplated by the Other
Agreement and the Initial Public Offering, will qualify as an exchange meeting
the requirements of Section 351 of the Code. The tax returns (and schedules
thereto) of Dentist and Pentegra shall be filed in a manner consistent with
such intention and Dentist and Pentegra shall each provide the other with such
tax information, reports, returns or schedules as may be reasonably required to
assist the other in so reporting the transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery, or by
facsimile AND overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
<PAGE>
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Dentist:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this Agreement,
whether or not such transactions are consummated. Without limiting the
generality of the foregoing and whether or not such liabilities may be deemed to
have been incurred in the ordinary course of business, Pentegra shall not be
liable to or required to pay, either directly or indirectly, any fees and
expenses of legal counsel, accountants, auditors or other persons or entities
retained by Dentist for services rendered in connection with negotiating and
closing the transactions contemplated by this Agreement or the documents to be
executed in connection herewith, whether or not such costs or expenses are
incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure, either
written or oral, regarding the transactions contemplated by this Agreement
without the prior written consent of the other party, provided that the
foregoing shall not prohibit any disclosure (a) by press release, filing or
otherwise that Pentegra has determined in good faith judgment to be required by
Federal securities laws or the rules of the National Association of Securities
Dealers, (b) to attorneys, accountants, investment bankers or other agents of
the parties assisting the parties in connection with the transactions
contemplated by this Agreement, and (c) by Pentegra in connection with the
conduct of its Initial Public Offering and conducting an examination of the
operations and assets of Dentist.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED
<PAGE>
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF
Dentist AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are
integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and not
only in connection with the specific representation in which they are explicitly
referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS
ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY
AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR
ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one and the same
instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any entity
that, through one or more intermediaries is, controlled, controlled by or under
common control with, Pentegra. Upon any such assignment prior to the Closing,
all references herein to Pentegra (including those to Pentegra Common Stock)
shall be deemed to include references to the assignee and the assignee's common
stock. Notwithstanding any such assignment, Pentegra shall not, absent a
written release from Dentist, be relieved from its obligations to Dentist under
this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Dentist, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a pro
rata portion of all taxes levied upon the Assets for the calendar year in which
the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated
among Dentist and Pentegra as of the Closing Date, and the prorated amount due
Pentegra shall be credited to the cash portion of the Purchase Consideration.
Upon payment by Pentegra of such taxes actually assessed and paid on the
Assets, Pentegra shall calculate the apportionment of such taxes and shall pay
Dentist or may demand from Dentist, and Dentist agrees to pay, the amount
necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions
<PAGE>
hereof must be in writing, and signed by the parties hereto. The waiver of any
of the terms and conditions of this Agreement shall not be construed as a
waiver of any other terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist
(hereinafter referred to as a "Party"), whether made before or after the
institution of any legal proceeding, any dispute among the parties hereto in
any way arising out of, related to, or in connection with this Agreement
(hereinafter a "Dispute"), shall be resolved by binding arbitration in
accordance with the terms of this Section (hereinafter the "Arbitration
Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in accordance
with the terms of this Arbitration Program, the Commercial Arbitration Rules of
the AAA. In the event of any inconsistency between this Arbitration Program and
those rules or statutes, then the terms of this Arbitration Program shall
control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been completed
and the arbitrators have determined each party's post-arbitration obligations
and responsibilities as it relates to such warranties and covenants. No
provision of, nor the exercise of any rights under, this Arbitration Program
shall limit the right of any Party at any time to seek or use ancillary or
preliminary judicial or non-judicial self help remedies for the purposes of
obtaining, perfecting, preserving, or foreclosing upon any personal property in
which there has been granted a security interest or lien by a Party in the
Documents. In Disputes involving indebtedness or other monetary obligations,
each Party agrees that the other Party may proceed against all liable persons,
jointly and severally against one or more of them, without impairing rights
against other liable persons. Nor shall a Party be required to join the
principal obligor or any other liable persons (e.g., sureties or guarantors) in
any proceeding against a particular person. A Party may release or settle with
one or more liable persons as the Party deems fit without releasing or impairing
rights to proceed against any persons not so released. All statutes of
limitation that would otherwise be applicable shall apply to any arbitration
proceeding.
The party seeking arbitration shall notify the other Party, in writing, of
that Party's desire to arbitrate a dispute; and each Party shall, within twenty
(20) days from the date such notification is received, select an arbitrator, and
those two arbitrators shall select a third arbitrator within ten (10) days
thereafter. The issues or claims in dispute shall be committed to writing,
separately stated and numbered, and each party's proposed answers or contentions
shall be signed below the questions. Failure by a party to select an arbitrator
within the prescribed time period shall serve as that Party's acquiescence and
acceptance of the other party's selection of arbitrator. The arbitrators shall
resolve all Disputes in accordance with the applicable substantive law. Any
Dispute shall be decided by a majority vote of three arbitrators, unless the
claim or amount in controversy does not exceed $100,000.00, in which case a
single arbitrator (who shall have authority to render a maximum award of
$100,000.00, including all damages of any kind, costs and fees) may decide the
Dispute. The arbitrators may grant any remedy or relief that the arbitrators
deem just and equitable and within the scope of this Arbitration Program. The
arbitrators may also grant such ancillary relief as is necessary to make
effective the award. In all arbitration proceedings the arbitrators shall make
specific and written findings of fact and conclusions of law. In all
arbitration proceedings in which the amount in controversy exceeds $100,000.00,
in the aggregate, the Parties shall have in addition to the statutory right to
seek vacation or modification of any award pursuant to applicable law, the right
to seek vacation or modification of any award that is based in whole, or in
part, on an incorrect or erroneous ruling of law by appeal to an appropriate
court having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must be
filed in a court having jurisdiction over the Dispute within 15 days from the
date the award in rendered. The arbitrators' findings of fact shall be binding
on all Parties and shall not be subject to further review except as otherwise
allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in writing
by the Parties or, in the absence of such agreement in Phoenix, Arizona or the
headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this
Arbitration Program shall survive any termination, amendment, or expiration of
the Documents, unless the Parties otherwise expressly agree in writing making
specific reference to this Arbitration Program. To the extent permitted by
applicable law, the arbitrator shall have the power to award
<PAGE>
recovery of all costs and fees (including attorney's fees, administrative fees,
and arbitrators' fees) to the prevailing Party. This Arbitration Program may
be amended, changed, or modified only by a writing which specifically refers to
this Arbitration Program and which is signed by all the Parties. If any term,
covenant, condition or provision of the Arbitration Program is found to be
unlawful or invalid or unenforceable, such illegality or invalidity or
unenforceable shall not affect the legality, validity or enforceability of the
remaining parts of this Arbitration Program, and all such remaining parts
hereof shall be valid and enforceable and have full force and effect as if the
illegal, invalid or unenforceable part had not been included. Each Party
agrees to keep all Disputes and arbitration proceedings strictly confidential,
except for disclosures of information required in the ordinary course of
business of the Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be found
to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect. In lieu of such
provision, there shall be added automatically as part of this Agreement, a
provision as similar in its terms to such provision as may be possible and be
legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
PENTEGRA DENTAL GROUP, INC.
By: /s/ James L. Dunn, Jr.
----------------------------------------
Its: Senior Vice President
---------------------------------------
/s/ Donald Tamborello
-------------------------------------------
Donald F. Tamborello, D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 [intentionally omitted]
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
AND
HELENA THOMAS, D.D.S.
<PAGE>
TABLE OF CONTENTS
PAGE
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. . . . . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
2.1 EXISTENCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. . . . . . . . . . . 3
2.4 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 [INTENTIONALLY DELETED]. . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 [INTENTIONALLY DELETED]. . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 DENTIST'S FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . 3
2.8 LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 CONDITION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. . . . . . . . . . . . . . . . . 3
2.11 INVENTORIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. . . . . . . . . . . . . . . . . . 3
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES . . . . . . . . 4
2.14 LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.16 SUBSEQUENT EVENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.19 LIABILITIES; DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.20 INSURANCE POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.21 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . 6
2.22 ADVERSE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.23 COMPLIANCE WITH LAWS IN GENERAL. . . . . . . . . . . . . . . . . . . . 7
2.24 THIRD PARTY PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.25 NO UNTRUE REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . 7
2.26 BANKING RELATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS . . . . . . . . 8
2.28 PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING . . . . . . . . . . . . . . . . . . 8
3.2 POWER AND AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 NO UNTRUE REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . 8
Section 4. COVENANTS OF DENTIST.
4.1 CONSUMMATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
4.2 BUSINESS OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 ACCESS AND NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. . . . . . . . . . 9
4.5 ACQUISITION PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . . 9
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . 9
4.7 EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 [INTENTIONALLY OMITTED]. . . . . . . . . . . . . . . . . . . . . . . . 10
4.9 REQUIREMENTS TO EFFECT ACQUISITION . . . . . . . . . . . . . . . . . . 10
4.10 ACCOUNTING AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . 10
4.11 WAIVER OF BULK TRANSFER COMPLIANCE . . . . . . . . . . . . . . . . . . 10
4.12 LEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.13 HIRING OF EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.14 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . 10
4.15 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.16 FORMATION OF THE PRACTICE. . . . . . . . . . . . . . . . . . . . . . . 10
4.17 CORPORATE RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.18 POWER AND AUTHORITY FOR TRANSACTIONS . . . . . . . . . . . . . . . . . 11
4.19 NO BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.20 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . 11
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. . . . . . . . . . 11
Section 6. COVENANTS OF PENTEGRA AND DENTIST
6.1 FILINGS; OTHER ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 12
7.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . 12
7.3 PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.4 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . 12
7.5 DUE DILIGENCE REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.6 APPROVAL BY THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . 12
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. . . . . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL . . . . . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8. DENTIST'S CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 13
8.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . 13
8.3 PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.4 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.5 SECURITIES APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9. CLOSING DELIVERIES
<PAGE>
9.1 DELIVERIES OF DENTIST. . . . . . . . . . . . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.2 INDEMNIFICATION BY PENTEGRA. . . . . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY DENTIST . . . . . . . . . . . . . . . . . . . . . . 16
10.4 INDEMNIFICATION PROCEDURE. . . . . . . . . . . . . . . . . . . . . . . 17
10.5 RIGHT OF SETOFF. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 18
12.2 INVESTMENTS; COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION. . . . . . . . . . . . . . . . . . . . . 19
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . 20
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . 21
14.12 NO RULE OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . 21
14.13 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . 21
14.14 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.15 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . 21
14.16 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.17 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as
of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware
corporation ("Pentegra") and Helena Thomas, D.D.S. ("Dentist").
WITNESSETH:
WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires
to receive from Dentist, certain assets of Dentist;
WHEREAS, Pentegra or its affiliated designee has entered into or intends to
enter into Agreements and Plans of Reorganization, Asset Contribution Agreements
and other acquisition agreements (collectively, the "Other Agreements") with
such persons or entities or the stockholders of such entities listed on EXHIBIT
A (together with Dentist, the "Target Companies");
WHEREAS, it is intended for Federal income tax purposes that the transfers
contemplated by this Agreement, the Other Agreements and Pentegra's initial
public offering ("Initial Public Offering") of shares of its common stock, par
value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange
within the meaning of Section 351 of the Internal Revenue Code of 1986, as
amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock
is consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions
contained herein, on the Closing Date, Dentist shall convey, transfer, deliver
and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all
of Dentist's right, title and interest in and to those certain assets described
on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively
"Assets"), free and clear of all obligations, security interests, claims, liens
and encumbrances, except as specifically assumed, or taken subject to, by
Pentegra pursuant to SECTION 1.3(b) hereof.
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and
<PAGE>
contributed hereunder, and Dentist shall retain all of its right, title and
interest in and to, the assets not specifically transferred hereunder,
including without limitation, the assets described on EXHIBIT 1.2 (the
"Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Dentist contained
herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Dentist the consideration specified in
ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b)
attached hereto to the extent that such obligations, commitments, liabilities
and indebtedness are current and not otherwise in default. (the "Assumed
Liabilities"). Notwithstanding any contrary provision contained herein,
Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i)
any liability, commitment or obligation or trade payable or indebtedness not
specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on
EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default
under such contracts, leases, commitments or obligations which occurred on or
before the Closing Date; (iii) any liability for any employee benefits
payable to employees of Dentist, including, but not limited to, liabilities
arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any
liability based upon or arising out of a violation of any antitrust or
similar restraint-of-trade laws by Dentist, including, without limiting the
generality of the foregoing, any such antitrust liability which may arise in
connection with agreements, contracts, commitments or orders for the sale of
goods or provision of services by Dentist reflected on the books of Dentist
at or prior to the Closing Date; (v) any liability based upon or arising out
of any tortious or wrongful actions of Dentist, any licensed professional
employee or independent contractor of Dentist, (vi) any liability for the
payment of any taxes of Dentist, including without limitation, sales, use and
other transfer taxes and income taxes arising from or by reason of the
transactions contemplated by this Agreement; (vii) any indebtedness secured
by deeds of trust or mortgages on real property; nor (viii) any liability
incurred or to be incurred pursuant to any malpractice or other suits or
actions pending against Dentist.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement, the
Dentist shall execute and deliver all such deeds, bills of sale, assignments and
assurances and take and do all such other actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right, title and interest
in, to and under the Assets in Pentegra or otherwise to carry out this
Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
Dentist hereby represents and warrants to Pentegra as follows:
2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the
State of Texas. Dentist does not have any assets, employees or offices in any
state other than the state set forth in the first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and
perform this
<PAGE>
Agreement and the other agreements to be executed and delivered in
connection herewith. This Agreement and all agreements and documents executed
and delivered in connection herewith have been, or will be as of the Closing
Date, duly executed and delivered by Dentist and constitute or will constitute
the legal, valid and binding obligations of Dentist in accordance with their
respective terms, except as may be limited by applicable bankruptcy, insolvency
or similar laws affecting creditors' rights generally or the availability of
equitable remedies. The execution and delivery of this Agreement, and the
agreements executed and delivered pursuant to this Agreement or to be executed
and delivered on the Closing Date, do not, and, subject to the receipt of
consents described on EXHIBIT 2.4, the consummation of the actions contemplated
hereby will not, result in the acceleration of, any obligation under any
mortgage, lien, lease, agreement, rent, instrument, order, arbitration award,
judgment or decree to which Dentist is a party or by which Dentist is bound, or
violate any material restrictions of any kind to which Dentist is subject, or
result in any lien or encumbrance on any of Dentist's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets, or
waivers thereof, have been duly obtained and are in full force and effect and
are described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Dentist, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses or
permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Dentist.
2.5 [INTENTIONALLY DELETED].
2.6 [INTENTIONALLY DELETED].
2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any related
unaudited statements of income, retained earnings, schedule of accounts
receivable, accounts payable and accrued liabilities, and cash flows for the
twelve months then ended (collectively, with the related notes thereto, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and results of operations of Dentist as of the dates and for the
periods indicated and reflect all fixed and contingent liabilities of Dentist.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Dentist leases, as lessor or lessee, real or personal property
used in operating the Business, related to the Assets or otherwise. All such
leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their
respective terms, and there is not under any such lease any existing default by
Dentist, as lessor or lessee, or any condition or event of which Dentist has
knowledge which with notice or lapse of time, or both, would constitute a
default, in respect of which Dentist has not taken adequate steps to cure such
default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Dentist has no knowledge of any
latent defects therein.
<PAGE>
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances set
forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to the Closing Date and evidence of
such releases of liens and claims shall be provided to Pentegra on the Closing
Date and the Assets shall not be used to satisfy such liens, claims or
encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned or
used by Dentist, are in good, current, standard and merchantable condition and
are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Dentist has no right, title or interest in or to patents, patent rights,
corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT
2.12 is a listing of all names of all predecessor companies of Dentist,
including the names of any entities from whom Dentist previously acquired
significant assets. Except for off-the-shelf software licenses and except as
set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of any patents,
trademarks, service marks, trade names, copyrights or applications therefor, or
manufacturing processes, formulas or trade secrets or similar items and no such
licenses are necessary for the conduct of the Business or the use of the Assets.
No claim is pending or has been made to the effect that the Assets or the
present or past operations of Dentist in connection with the Assets or Business
infringe upon or conflict with the asserted rights of others to any patents,
patent rights, manufacturing processes, trade names, trademarks, service marks,
inventions, licenses, specialized treatment protocols, copyrights, formulas,
know-how and trade secrets. Dentist has the sole and exclusive right to use all
Assets constituting proprietary rights without infringing or violating the
rights of any third parties and no consents of any third parties are required
for the use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on
EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this
Agreement of: (a) the most recent payroll report of Dentist, showing all current
employees of Dentist and their current levels of compensation, (b) promised
increases in compensation of employees of Dentist that have not yet been
effected, (c) oral or written employment agreements, consulting agreements or
independent contractor agreements (and all amendments thereto) to which Dentist
is a party, copies of which have been delivered to Pentegra, and (d) all
employee manuals, materials, policies, procedures and work-related rules, copies
of which have been delivered to Pentegra. Dentist is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Dentist has not engaged in any unfair labor practice.
There are no unfair labor practices charges or complaints pending or threatened
against Dentist, and Dentist has never been a party to any agreement with any
union, labor organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the
Assets is subject to any pending, nor does Dentist have knowledge of any
threatened, litigation, governmental investigation, condemnation or other
proceeding against or relating to or affecting Dentist, the Business, the Assets
or the transactions contemplated by this Agreement, and, to the knowledge of
Dentist, no basis for any such action exists, nor is there any legal impediment
of which Dentist has knowledge to the continued operation of its business or the
use of the Assets in the ordinary course, subject to consents set forth on
EXHIBIT 2.4.
2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Dentist ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on
<PAGE>
such Exhibits, all of such Contracts are valid, binding and enforceable in
accordance with their terms and are in full force and effect, and no
defenses, offsets or counterclaims have been asserted or may be made by any
party thereto. Except as indicated on such Exhibits, there is not under any
such Contract any existing default by Dentist, or any condition or event of
which Dentist has knowledge which with notice or lapse of time, or both,
would constitute a default. Dentist has no knowledge of any default by any
other party to such Contracts. Dentist has not received notice of the
intention of any party to any Contract to cancel or terminate any Contract
and have no reason to believe that any amendment or change to any Contract is
contemplated by any party thereto. Other than those contracts, obligations
and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist
is not a party to any material written or oral agreement contract, lease or
arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product or
service;
(h) Loan agreement or other contract for money borrowed or lent or to
be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of the
Dentist, oral or written, that provide for prepayments or deferred installment
payments; or
(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Dentist on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) or entered into any contract, lease, license or
commitment, except in connection with the performance of this Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued, contingent
or otherwise) other than (i) liabilities shown or reflected on the Balance
Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary
course of business;
<PAGE>
(c) Made any payments to or loaned any money to any person or entity
other than in the ordinary course of business;
(d) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(e) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have been
required due to income or operations of Dentist since the Balance Sheet Date;
(f) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(g) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(h) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants or
agents, or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of any officer, employee, consultant or agent;
(i) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00);
(j) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(k) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties, assets
or business or the Business or the Assets, or experienced any other material
adverse change in its financial condition, assets, prospects, liabilities or
business; or
(l) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it. All such tax returns are complete and accurate in all respects and
properly reflect the relevant taxes for the periods covered thereby. Dentist
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Dentist. There are no audits relating to taxes of
Dentist pending or in process or, to the knowledge of Dentist, threatened.
Dentist is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency. There are no
liens or encumbrances relating to taxes on or threatened against any of the
assets of Dentist. Dentist has withheld and paid all taxes required by law to
have been withheld and paid by it. Neither Dentist nor any predecessor of
Dentist is or has been a party to any tax allocation or sharing agreement or a
member of an affiliated group of corporations filing a consolidated Federal
income tax return. Dentist has delivered to Pentegra correct and complete
copies of Dentist's three most recently filed annual state, local and Federal
income tax returns, together with all examination reports and statements of
deficiencies assessed against or agreed to by Dentist during the three calendar
year period preceding the date of this Agreement. Dentist has neither made any
payments, is obligated to make any payments, or is a party to any agreement that
<PAGE>
under any circumstance could obligate it to make any payments that will not be
deductible under Code section 280G.
(b) Dentist does not intend to dispose of any of the shares of Pentegra
Common Stock to be received hereunder and is not a party to any plan,
arrangement or agreement for the disposition of such shares. Nothing contained
herein shall prohibit Dentist from selling such shares of Pentegra Common Stock
after the designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated by
this Agreement which may be now or hereafter asserted against Pentegra, Dentist
resulting from any action taken by Dentist or their respective agents or
employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against
on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and
has not incurred since that date and will not have incurred as of the Closing
Date, any liabilities or obligations of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, other than those
incurred in the ordinary course of business or as set forth on EXHIBIT 2.16.
Dentist does not know, or have reasonable grounds to know, of any basis for the
assertion against Dentist as of the Balance Sheet Date, of any claim or
liability of any nature in any amount not fully reflected or reserved against on
the Balance Sheet, or of any claim or liability of any nature arising since that
date other than those incurred in the ordinary course of business or
contemplated by this Agreement. All indebtedness of Dentist (including without
limitation, indebtedness for borrowed money, guaranties and capital lease
obligations) is described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist
carries property, liability, malpractice, workers' compensation and such other
types of insurance as is customary in the industry. Valid and enforceable
policies in such amounts are outstanding and duly in force and will remain duly
in force through the Closing Date. All such policies are described in EXHIBIT
2.20 attached hereto and true and correct copies have been delivered to
Pentegra. Dentist has not received notice or other communication from the
issuer of any such insurance policy cancelling or amending such policy or
threatening to do so. Neither Dentist nor any licensed professional employee of
Dentist has any outstanding claims, settlements or premiums owed against any
insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached
hereto, Dentist has neither established, nor maintains, nor is obligated to make
contributions to or under or otherwise participate in, (a) any bonus or other
type of compensation or employment plan, program, agreement, policy, commitment,
contract or arrangement (whether or not set forth in a written document); (b)
any pension, profit-sharing, retirement or other plan, program or arrangement;
or (c) any other employee benefit plan, fund or program, including, but not
limited to, those described in SECTION 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT
2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been
operated and administered in all material respects in accordance with all
applicable laws, rules and regulations, including without limitation, ERISA, the
Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of
1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination
in Employment Act of 1967, as amended, and the related rules and regulations
adopted by those Federal agencies responsible for the administration of such
laws. No act or failure to act by Dentist has resulted in a "prohibited
transaction" (as defined in ERISA) with respect to the Dentist Plans. No
"reportable event" (as defined in ERISA) has occurred with respect to any of the
Dentist Plans. Dentist has not previously made, is not currently making, and is
not obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Dentist Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at
<PAGE>
least equal to the value of plan liabilities or (ii) the value of plan
liabilities in excess of plan assets is disclosed on the Balance Sheet, all
as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing
Date, a party to any agreement or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree, rule or
regulation that materially and adversely affects the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Dentist,
the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed
professional employees, and the conduct of the Business and use of the Assets,
have complied with all applicable laws, rules, regulations and licensing
requirements, including, without limitation, the Federal Environmental
Protection Act, the Occupational Safety and Health Act, the Americans with
Disabilities Act and any environmental laws and medical waste laws, and there
exist no violations by Dentist or any licensed professional employee of Dentist
of any Federal, state or local law or regulation. Dentist has not received any
notice of a violation of any Federal, state and local laws, regulations and
ordinances relating to the operations of the Business and Assets and no notice
of any pending inspection or violation of any such law, regulation or ordinance
has been received by Dentist.
2.24 THIRD PARTY PAYORS. Dentist and each licensed professional
employee or independent contractor of Dentist has timely filed all claims or
other reports required to be filed with respect to the purchase of services
by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are
no pending appeals, overpayment determinations, adjustments, challenges,
audit, litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Dentist and each
licensed professional employee of Dentist. Neither Dentist nor any licensed
professional employee of Dentist has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Dentist and Dentist's licensed professional employees has not (a) knowingly
and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist
in this Agreement, and no Exhibit or certificate issued or executed by, or
information furnished by Dentist or to be furnished by Dentist to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Dentist has with any bank or other
financial institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or
employee or family member of Dentist, or their respective spouses, children or
affiliates, owns directly or indirectly, on an individual or joint basis, any
interest in, has a compensation or other financial arrangement with, or
<PAGE>
serves as an officer or director of, any customer or supplier or competitor
of Dentist or any organization that has a material contract or arrangement
with Dentist.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of
the names and addresses of each payor of Dentist's services which accounted for
more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has
good relations with all such payors and other material payors of Dentist and
none of such payors has notified Dentist that it intends to discontinue its
relationship with Dentist or to deny any claims submitted to such payor for
payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Dentist as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions required
by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize
the execution, delivery and performance of this Agreement and such related
documents. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing Date,
duly executed and delivered by Pentegra and constitute or will constitute the
legal, valid and binding obligations of Pentegra, enforceable against Pentegra
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and delivery
of this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and, the
consummation of the actions contemplated hereby will not, violate any provision
of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or decree
to which Pentegra is a party or by which Pentegra is bound, or violate any
material restrictions of any kind to which Pentegra is subject, or result in any
lien or encumbrance on any of Pentegra's assets. Other than as have been
obtained or as would not have a material adverse effect, there are no consents
of any person or entity required for the transaction contemplated hereby on
behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Pentegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would not
have a material adverse effect, there are no proceedings pending or, to the
knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses or
permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any pending,
nor does Pentegra have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Pentegra, its business, assets or the transactions contemplated by
this Agreement, and, to the knowledge of Pentegra, no basis for any such action
exists, nor is there any legal impediment of which Pentegra has knowledge to the
continued operation of its business or the use of its Assets in the ordinary
course.
<PAGE>
3.5 TAXES. Pentegra has filed all tax returns (including tax reports and
other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it, other than as would not have a material adverse effect. Pentegra
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Pentegra. There are no audits relating to taxes of
Pentegra pending or in process or, to the knowledge of Pentegra, threatened.
Pentegra is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra
in this Agreement, and no Exhibit or certificate issued by officers or directors
of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements or facts contained therein not
misleading.
SECTION 4. COVENANTS OF DENTIST.
Dentist agrees that between the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and conditions. Dentist agrees to complete the
Exhibits hereto to be provided by him in form and substance satisfactory to
Pentegra.
4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the
Assets in the ordinary course. Dentist shall not enter into any lease,
contract, indebtedness, commitment, purchase or sale or acquire or dispose of
any capital asset relating to the Business or the Assets except in the ordinary
course of business. Dentist shall use their best efforts to preserve the
Business and Assets intact and shall not take any action that would have an
adverse effect on the Business or Assets. Dentist shall use their best efforts
to preserve intact the relationships with payors, customers, suppliers, patients
and others having significant business relations with Dentist. Dentist shall
collect its receivables and pay its trade payables in the ordinary course of
business. Dentist shall not introduce any new method of management, operations
or accounting.
4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized
representatives access to, and make available for inspection, all of the assets
and business of Dentist, the Business and the Assets, including employees,
customers and suppliers and permit Pentegra and its authorized representatives
to inspect and make copies of all documents, records and information with
respect to the business or assets of Dentist, the Business or the Assets as
Pentegra or its representatives may request. Dentist shall promptly
<PAGE>
notify Pentegra in writing of (a) any notice or communication relating to a
default or event that, with notice or lapse of time or both, could become a
default, under any contract, commitment or obligation to which Dentist is a
party or relating to the Business or the Assets, and (b) any adverse change
in Dentist's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall
use his best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby, including
consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain
all licenses, permits, approvals or other authorizations required under any law,
rule, regulation, or otherwise to provide the services of the Practice
contemplated by the Service Agreement and to conduct the intended business of
the Practice and operate the Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of Closing or the termination of this Agreement in accordance with the
provisions hereof, Dentist shall not, and shall use its best efforts to cause
Dentist's employees, agents and representatives not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making or implementation
of any proposal or offer, including without limitation, any proposal or offer to
the Dentist, with respect to a merger, acquisition, consolidation or similar
transaction involving, or the purchase of all or any significant portion of the
assets or any equity securities of Dentist or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to such proposal or offer, and Dentist
will immediately cease any such activities, discussions or negotiations
heretofore conducted with respect to any of the foregoing. Dentist shall
immediately notify Pentegra if any such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund completely
for any accrued benefits, where applicable, or vested accrued benefits for which
Dentist or any entity might have any liability whatsoever arising from any
insurance, pension plan, employment tax or similar liability of Dentist to any
employee or other person or entity (including, without limitation, any Dentist
Plan and any liability under employment contracts with Dentist) allocable to
services performed prior to the Closing Date. Dentist acknowledges that the
purpose and intent of this covenant is to assure that Pentegra shall have no
liability whatsoever at any time after the Closing Date with respect to any of
Dentist's employees or similar persons or entities, including, without
limitation, any Dentist Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of the Dentist (other than in the ordinary course of business) or other employee
or an independent contractor of Dentist, adopt, amend or terminate any
compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect upon Dentist, its business, assets or
prospects.
4.8 [INTENTIONALLY OMITTED].
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best
efforts to take, or cause to be taken, all actions necessary to effect the
acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material
respect the tax or financial accounting methods or practices followed by Dentist
(including any material change in any assumption underlying, or any method of
calculating, any bad debt, contingency or other reserve), except
<PAGE>
as may be required by law or generally accepted accounting principles.
Dentist will duly, accurately and timely (without regard to any extensions of
time) file all returns, information statements and other documents relating
to taxes of Dentist required to be filed by it, and pay all taxes required to
be paid by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive
any compliance with the applicable state Bulk Transfers Act, if any. Dentist
covenants and agrees that all of the creditors with respect to the Business and
the Assets will be paid in full by Dentist prior to the Closing Date, except to
extent that any liability to such creditors is assumed by Pentegra pursuant to
this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with
proof of payment of all creditors with respect to the Business and the Assets.
Notwithstanding the foregoing, Dentist may dispute the validity or amount of any
such creditor's claim without being deemed to be in violation of this SECTION
4.11, provided that such dispute is in good faith and does not unreasonably
delay the resolution of the claim and provided, further that Dentist agrees to
indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Dentist leases any of its premises from the Dentist or
other affiliate of Dentist, Pentegra shall have entered into a building lease
(the "Building Lease") with the owner of such premises on terms and conditions
satisfactory to Pentegra, the terms and conditions of which shall include,
without limitation, (i) a five year initial term plus three five-year renewal
options, (ii) a lease rate equal to the fair market value lease rate, as agreed
to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made
by Pentegra for the purpose of allowing Pentegra to hire those non-dental
employees of Dentist designated by Pentegra, such employment to be effective as
of the Closing Date. Notwithstanding the above, Dentist shall remain liable
under any Dentist Plans for any claims incurred by any employees or their
spouses or dependents, and for all compensation, bonuses, benefits and other
such items and other liabilities related to Dentist's employees incurred by
Dentist prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all
employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be
treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and
shall be treated as Clinic employees for purposes of eligibility and
participation in Dentist Plans.
4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective as
of the Closing Date.
4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited
liability company, partnership or other legal entity (the "Practice") approved
by Pentegra for the purpose of practicing dentistry and entering into the
Service Agreement. The Practice shall be duly organized, in existing and in
good standing under the laws of the State in which the Dentist and the Practice
are to practice dentistry. The Practice shall have all necessary power to own
all of its assets and to carry on its business as such business is now being
conducted. The Dentist shall be the sole member/shareholder/partner of the
Practice and own all such interests free of all security interests, claims,
encumbrances and liens. Each interest in the Practice shall be legally and
validly issued and fully paid and nonassessable. There shall be no outstanding
(a) bonds, debentures, notes or other obligations the holders of which have the
right to vote with the members/partners/shareholders of the Practice on any
matter, (b) securities of the Practice convertible into equity interests in the
Practice, or (c) commitments, options, rights or warrants to issue any such
equity interests in the Practice, to issue securities of the Practice
convertible into such equity interests, or to redeem any securities of the
Practice. No interests of the Practice shall have been issued or disposed of in
violation of
<PAGE>
the preemptive rights, rights of first refusal or similar rights of any of
the Practice's members/partners/shareholders. The Practice shall quality to
do business as a foreign entity in any other state or jurisdiction by reason
of its business, properties or activities in or relating to such other state
or jurisdiction.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations
and minutes of the Practice and all amendments thereto of the Practice shall
have been delivered to Pentegra and shall be in form and substance satisfactory
to Pentegra. The minute books of the Practice shall contain all accurate
minutes of the meetings of and consents to actions taken without meetings of the
members\managers/partners/board of directors of the Practice since its
formation. The books of account of the Practice shall have been kept accurately
in the ordinary course of business and the revenues, expenses, assets and
liabilities of the Practice shall have been properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements
and other documents to be executed and delivered by it pursuant to this
Agreement, including without limitation, the Service Agreement and each
Employment Agreement or to be executed and delivered on the Closing Date, and
has taken all action required by law, its Organization/Partnership
Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to
authorize the execution, delivery and performance of such documents. The
Service Agreement, the Employment Agreement and the other agreements
contemplated hereby shall have been duly executed and delivered by the
Practice and constitute or will constitute the legal, valid and binding
obligations of the Practice enforceable against the Practice in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of the
Service Agreement, the Employment Agreements and the other agreements
contemplated hereby will not violate any provision of the organizational
documents of the Practice or any provisions of, or result in the acceleration
of, any obligation under any mortgage, lien, lease, agreement, rent,
instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any
material restrictions of any kind to which the Practice is subject, or result
in any lien or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and has filed with
the proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
<PAGE>
SECTION 6. COVENANTS OF PENTEGRA AND DENTIST.
Pentegra and Dentist agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to
promptly prepare and file with the Securities Exchange Commission ("SEC")
the Registration Statement on Form S-1 (or other appropriate Form) to be
filed by Pentegra in connection with its Initial Public Offering (including
the prospectus constituting a part thereof, the "Registration Statement").
Pentegra shall obtain all necessary state securities laws or "Blue Sky"
permits and approvals required to carry out the transactions contemplated by
this Agreement and the Dentist shall furnish all information concerning
Dentist as may be reasonable requested in connection with any such action.
Dentist represents and warrants that none of the information or documents
supplied or to be supplied by it specifically for inclusion in the
Registration Statement, by exhibit or otherwise, will, at the time the
Registration Statement and each amendment or supplement thereto, if any,
becomes effective under the Securities Act of 1933, 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, in light of
the circumstances under which they were made, not misleading. Dentist shall
be entitled to review the Registration Statement and each amendment thereto,
if any, prior to the time each becomes effective under the Securities Act of
1933.
Dentist shall furnish Pentegra will all information concerning itself and
such other matters as may be reasonable requested by Pentegra in connection
with the preparation of the Registration Statement and each amendment or
supplement thereto, or any other statement, filing, notice or application
made by or on behalf of each such party or any of its subsidiaries to any
governmental entity in connection with the transactions contemplated by the
Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Dentist contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied
with all covenants and conditions required by this Agreement to be performed
and complied with by Dentist prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Dentist shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Dentist, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
<PAGE>
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service
Agreement"), in substantially the form attached hereto as EXHIBIT 7.7,
pursuant to which Pentegra will provide management services to the Practice.
Dentist shall have executed and delivered a Guaranty Agreement in
substantially the form attached as EXHIBIT 4.10 of the Service Agreement
pursuant to which Dentist shall, among other things, guaranty the obligations
of the Practice under the Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her
employment agreement and executed an employment agreement ("Employment
Agreement") with the Practice in form and substance attached hereto as
EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra.
7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary
government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables
or payables between Dentist and its affiliates and Dentist shall not have any
liabilities, including indebtedness, guaranties and capital leases, that are
not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Dentist shall have named Pentegra as an additional
insured on its liability insurance program in accordance with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Dentist since the Balance Sheet Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. DENTIST'S CONDITIONS PRECEDENT.
The obligations of Dentist hereunder are subject to fulfillment at or
prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pentegra contained herein shall have been true and correct in all respects
when initially made and shall be true and correct in all respects as of the
Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
<PAGE>
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly
executed in form satisfactory to Dentist and its counsel, referred to in
SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF DENTIST. Within five business days after requested by
Pentegra, Dentist shall deliver to Pentegra the following, all of which shall
be in a form satisfactory to counsel to Pentegra and shall be held by Jackson
& Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant
to an escrow agreement or letter agreement in form and substance mutually
acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a bill of sale conveying the Assets to Pentegra;
(d) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(e) certificates of Dentist dated as of the Closing Date, (i) as to
the truth and correctness of the representations and warranties of Dentist
contained herein; (ii) as to the performance of and compliance by Dentist
with all covenants contained herein; and (iii) certifying that all conditions
precedent of Dentist to the Closing have been satisfied;
(f) an opinion of counsel to Dentist opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Dentist, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Pentegra;
(g) non-foreign affidavits executed by Dentist;
(h) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(i) an executed Registration Rights Agreement between Pentegra and
Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
<PAGE>
(j) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Dentist the following, all of which shall be in a form
satisfactory to counsel to Dentist and shall be held by Jackson & Walker,
L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an
escrow agreement or letter agreement in form and substance mutually
acceptable to the parties hereto:
(a) the Acquisition Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Dentist;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Dentist;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Dentist to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit attached hereto, any agreement executed pursuant hereto, and
any certificate executed and delivered by any party pursuant to the terms of
this Agreement, shall constitute representations and warranties of Dentist or
<PAGE>
of Pentegra, as the case may be. All such representations and warranties,
and all representations and warranties expressly labeled as such in this
Agreement shall survive the date of this Agreement and the Closing Date for a
period of five (5) years following the Closing Date, except that (i) the
representations and warranties with respect to environmental and medical
waste laws and health care laws and matters shall survive for a period of
fifteen (15) years and tax representations shall survive until one year after
the expiration of the applicable statute of limitations. Each party
covenants with the other parties not to make any claim with respect to such
representations and warranties, against any party after the date on which
such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof,
unless such party has timely given the notice required in SECTION 10.2, 10.3
or 10.4 hereof, as the case may be. Each party hereby releases, acquits and
discharges the other party from any and all claims and demands, actions and
causes of action, damages, costs, expenses and rights of setoff with respect
to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable,
are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL
INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE
EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND
AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS,
DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION
10.3
<PAGE>
AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS,
AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES
OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN
"INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES,
LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES
(INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL
THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH
RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR
AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING
HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF
OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY
THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR
AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION,
PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR
THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED
TO PENTEGRA OR ITS COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY
PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING
A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT
OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
<PAGE>
THEREIN A MATERIAL FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the
defense of such action or proceeding, such Indemnified Person shall notify
Indemnitor thereof. If any such action or other proceeding shall be brought
against any Indemnified Person, Indemnitor shall, upon written notice given
within a reasonable time following receipt by Indemnitor of such notice from
Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Dentist giving rise to
indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be
entitled to offset the amount of damages incurred by it as a result of such
breach of warranty, representation, covenant or agreement against any amounts
payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Dentist
contained in this Agreement or in any certificate or other document executed
and delivered by Dentist pursuant to this Agreement is or becomes untrue or
breached in any material respect or if Dentist fails to comply in any
material respect with any covenant or agreement contained herein, and any
such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
(c) at any time by Dentist if any representation or warranty of Pentegra
contained in this Agreement or
<PAGE>
in any certificate or other document executed and delivered by Pentegra
pursuant to this Agreement is or becomes untrue or breached in any material
respect or if Pentegra fails to comply in any material respect with any
covenant or agreement contained herein and such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;
(d) by Pentegra or Dentist if the transaction contemplated hereby shall
not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Dentist, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares
of Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer
shall be treated as effective for any purpose or (b) engage in any
transaction, whether or not with respect to any shares of Pentegra Common
Stock or any interest therein, the intent or effect of which is to reduce the
risk of owning shares of Pentegra Common Stock. The certificates evidencing
the Pentegra Common Stock delivered to Dentist pursuant to the terms hereof
will bear a legend substantially in the form set forth below and containing
such other information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the
shares of Pentegra Common Stock to be delivered to Dentist pursuant to this
Agreement have not been and will not be registered under the Securities Act
of 1933 and may not be resold without compliance with the Securities Act of
1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this
Agreement is being acquired solely for its own account, for investment
purposes only and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution. Dentist
covenants, warrants and represents that none of the shares of Pentegra Common
Stock issued to it will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after full compliance with all of
the applicable provisions of the Securities Act, as amended, and the rules
and regulations of the Securities Exchange Commission and applicable state
securities laws and regulations. All certificates evidencing shares of
Pentegra Common Stock shall bear the following legend in addition to the
legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
<PAGE>
In addition, certificates evidencing shares of Pentegra Common Stock
shall bear any legend required by the securities or blue sky laws of any
state where Dentist resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic
risk of an investment in Pentegra Common Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and has
such knowledge and experience in financial and business matters that they are
capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect its own interests in connection with
the acquisition of the Pentegra Common Stock. Dentist and its
representatives have had an adequate opportunity to ask questions and receive
answers from the officers of Pentegra concerning any and all matters relating
to the background and experience of the officers and directors of Pentegra,
the plans for the operations of the business of Pentegra, and any plans for
additional acquisitions and the like. Dentist and its representatives have
asked any and all questions in the nature described in the preceding sentence
and all questions have been answered to their satisfaction. Dentist is an
"accredited investors" as defined in Regulation D of the Securities Act of
1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes
and acknowledges that it had in the past, currently have, and in the future
may possibly have, access to certain confidential information of Pentegra
that is valuable, special and unique assets of Pentegra's businesses.
Dentist agrees that it will not disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or
reason whatsoever, unless (i) such information becomes available to or known
by the public generally through no fault of Dentist, (ii) disclosure is
required by law or the order of any governmental authority under color of
law, provided, that prior to disclosing any information pursuant to this
clause (ii), Dentist shall, if possible, give prior written notice thereof to
the other parties hereto, and provide such other parties hereto with the
opportunity to contest such disclosure, (iii) Dentist reasonably believes
that such disclosure is required in connection with the defense of a lawsuit
against the disclosing party, or (iv) Dentist is the sole and exclusive owner
of such confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Dentist of the provisions of this SECTION 13, Pentegra shall be entitled to
an injunction restraining Dentist from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
Pentegra from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages. The obligations of the
parties under this SECTION 13 shall survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement, together with the transactions contemplated by the Other
Agreement and the Initial Public Offering, will qualify as an exchange
meeting the requirements of Section 351 of the Code. The tax returns (and
schedules thereto) of Dentist and Pentegra shall be filed in a manner
consistent with such intention and Dentist and Pentegra shall each provide
the other with such tax information, reports, returns or schedules as may be
reasonably required to assist the other in so reporting the transactions
contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
<PAGE>
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Dentist:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Dentist for services rendered in
connection with negotiating and closing the transactions contemplated by this
Agreement or the documents to be executed in connection herewith, whether or
not such costs or expenses are incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Dentist.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED
<PAGE>
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF
Dentist AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one and the
same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Dentist, be relieved from its obligations
to Dentist under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Dentist, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions
<PAGE>
hereof must be in writing, and signed by the parties hereto. The waiver of
any of the terms and conditions of this Agreement shall not be construed as a
waiver of any other terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Dentist (hereinafter referred to as a "Party"), whether made before or after
the institution of any legal proceeding, any dispute among the parties hereto
in any way arising out of, related to, or in connection with this Agreement
(hereinafter a "Dispute"), shall be resolved by binding arbitration in
accordance with the terms of this Section (hereinafter the "Arbitration
Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or foreclosing upon any
personal property in which there has been granted a security interest or lien
by a Party in the Documents. In Disputes involving indebtedness or other
monetary obligations, each Party agrees that the other Party may proceed
against all liable persons, jointly and severally against one or more of
them, without impairing rights against other liable persons. Nor shall a
Party be required to join the principal obligor or any other liable persons
(e.g., sureties or guarantors) in any proceeding against a particular person.
A Party may release or settle with one or more liable persons as the Party
deems fit without releasing or impairing rights to proceed against any
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoenix,
Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award
<PAGE>
recovery of all costs and fees (including attorney's fees, administrative
fees, and arbitrators' fees) to the prevailing Party. This Arbitration
Program may be amended, changed, or modified only by a writing which
specifically refers to this Arbitration Program and which is signed by all
the Parties. If any term, covenant, condition or provision of the
Arbitration Program is found to be unlawful or invalid or unenforceable, such
illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or by
applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
PENTEGRA DENTAL GROUP, INC.
By: /s/ James L. Dunn, Jr.
------------------------------------
Its: Senior Vice President
------------------------------------
/s/ Helena Thomas, D.D.S.
-------------------------------------------
Helena Thomas, D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
- ------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 [intentionally omitted]
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
EXHIBIT 2.53
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
LOUIS J. THORNLEY, D.D.S., P.S.,
and
LOUIS J. THORNLEY, D.D.S.
<PAGE>
TABLE OF CONTENTS
PAGE
Section 1. TERMS OF THE REORGANIZATION
1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . 2
1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . 4
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . 9
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . 12
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . 13
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 13
Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . 13
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 14
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . 14
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . 14
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . 14
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . 14
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . 14
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . 14
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . 14
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . 14
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . 14
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . 15
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 15
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . 15
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . 15
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . 15
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . 16
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . 17
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . 17
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . 18
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . 19
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . 20
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . 20
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . 21
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . 22
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . 22
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . 22
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . 22
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . 22
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . 23
14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . 23
14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . 23
14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and
executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra"), LOUIS J. THORNLEY, D.D.S., P.S., an Alaska
professional corporation ("Company") and LOUIS J. THORNLEY, D.D.S., shareholder
of Company (referred to herein as "Shareholder" or "Shareholders").
WITNESSETH:
WHEREAS, Company operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, the Boards of Directors of the Company and Pentegra have
determined that a reorganization between each of them is in the best
interests of their respective companies;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Company, the "Target Companies")
and simultaneously with the closing of the reorganization contemplated
herein, intends to consummate its initial public offering ("Initial Public
Offering") of shares of its common stock, par value $.01 per share ("Pentegra
Common Stock");
WHEREAS, it is intended for Federal income tax purposes that the
reorganization contemplated by this Agreement shall qualify as an
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE REORGANIZATION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.2 MERGER. Subject to and upon the terms and conditions contained
herein, on the Closing Date, the Company shall be merged with and into
Pentegra (or its designated affiliate, in which case, the references herein
to Pentegra shall be to such designated affiliate and its shares of common
stock) in accordance with this Agreement and the separate corporate existence
of the Company shall thereupon cease ("Merger"). Pentegra shall be the
surviving corporation in the Merger ("Surviving Corporation") and shall
<PAGE>
continue to be governed by the laws of the State of Delaware and the separate
corporate existence of Pentegra with all rights, privileges, powers,
immunities and purposes shall continue unaffected by the Merger. The Merger
shall have the effects specified in the Delaware General Corporation Law and
the Alaska Business Corporation Law. If all the conditions to the Merger set
forth herein shall have been fulfilled or waived in accordance herewith and
this Agreement shall not have been terminated in accordance herewith, the
parties hereto shall cause to be properly executed and filed on the Closing
Date Certificates of Merger for the Company meeting the applicable legal
requirements. The Mergers shall become effective on the Closing Date or the
filing of such documents, in accordance with applicable law, or at such later
time as the parties hereto have agreed upon and designated in such merger
filings.
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of
Incorporation and Bylaws of Pentegra shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation until duly amended in
accordance with their terms.
1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra
immediately prior to the effective date of the Merger shall be the directors
of the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal
in accordance with the Surviving Corporation's Certificate of Incorporation
and Bylaws. The persons who are officers of Pentegra immediately prior to
the effective date of the Merger shall be the officers of the Surviving
Corporation and shall hold their respective offices until their successors
have been duly elected or appointed and qualified or until their earlier
death, resignation or removal.
1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and
without any action on the part of the holder thereof, all shares of the
Company's common stock issued and outstanding on the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired and
shall cease to exist, and each holder of a certificate of representing shares
of Company common stock shall thereafter cease to have any rights with
respect to such shares except the right to receive the consideration set
forth on ANNEX I attached hereto (the "Merger Consideration"). Each share
of common stock of the Company held in treasury at the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired
without payment of any consideration therefor. On the effective date of the
Merger, each share of Pentegra Common Stock issued and outstanding shall, by
virtue of the Mergers, and without any action on the part of the holder
thereof, continue unchanged and remain outstanding as a share of validly
issued, fully paid and nonassessable share of Surviving Corporation common
stock.
1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the
Merger, the Shareholders, as the holders of a certificate or certificates
representing shares of Company common stock shall, upon surrender of such
certificate or certificates, receive the Merger Consideration, and until the
certificate or certificates of Company common stock shall have been
surrendered by the Shareholder and replaced by a certificate or certificates
representing Pentegra Common Stock (as set forth on ANNEX I), the certificate
or certificates of Company common stock shall, for all purposes be deemed to
evidence ownership of the number of shares of Pentegra Common Stock
determined in accordance with the provisions of ANNEX I. All shares of
Pentegra Common Stock issuable to the Shareholders in the Merger shall be
deemed for all purposes to have been issued by Pentegra on the Closing Date.
The Shareholders shall deliver to Pentegra at Closing the certificate or
certificates representing the Company common stock owned by them, duly
endorsed in blank by the Shareholders, or accompanied by duly executed blank
stock powers, and with all necessary transfer tax and other revenue stamps,
acquired at the Shareholder's expense, affixed and cancelled.
1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this
<PAGE>
Agreement, the Company and Shareholders shall excecute and deliver all such
deeds, bills of sale, assignments and assurances and take and do all such
other actions and things as may be necessary or desirable to vest, perfect or
confirm any and all right, title and interest in, to and under the Assets in
Pentegra or otherwise to carry out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional
corporation or association, as applicable, duly organized, validly existing
and in good standing under the laws of the State of Alaska. Company has all
necessary corporate powers to own all of its assets and to carry on its
business as such business is now being conducted. Company does not own stock
in or control, directly or indirectly, any other corporation, association or
business organization, nor is Company a party to any joint venture or
partnership. The Shareholders are the sole shareholders of Company and own
all outstanding shares of capital stock free of all security interests,
claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each
share of Company's common stock has been legally and validly issued and fully
paid and nonassessable. No shares of capital stock of Company are owned by
Company in treasury. There are no outstanding (a) bonds, debentures, notes or
other obligations the holders of which have the right to vote with the
stockholders of Company on any matter, (b) securities of Company convertible
into equity interests in Company, or (c) commitments, options, rights or
warrants to issue any such equity interests in Company, to issue securities
of Company convertible into such equity interests, or to redeem any
securities of Company. No shares of capital stock of Company have been
issued or disposed of in violation of the preemptive rights, rights of first
refusal or similar rights of any of Company's stockholders. Company is not
required to qualify to do business as a foreign corporation in any other
state or jurisdiction by reason of its business, properties or activities in
or relating to such other state or jurisdiction. Company does not have any
assets, employees or offices in any state other than the state set forth in
the first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate
power to execute, deliver and perform this Agreement and all agreements and
other documents executed and delivered by it pursuant to this Agreement or to
be executed and delivered on the Closing Date, and has taken all action
required by law, its Articles or Certificate of Incorporation, its Bylaws or
otherwise, to authorize the execution, delivery and performance of this
Agreement and such related documents. Each Shareholder has the legal
capacity to enter into and perform this Agreement and the other agreements to
be executed and delivered in connection herewith. Company has obtained the
approval of its stockholders necessary to the consummation of the
transactions contemplated herein. This Agreement and all agreements and
documents executed and delivered in connection herewith have been, or will be
as of the Closing Date, duly executed and delivered by Company and
Shareholders, as appropriate, and constitute or will constitute the legal,
valid and binding obligations of Company and Shareholders, enforceable
against Company and Shareholders in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of
consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, violate any provision of the Articles or
Certificate of Incorporation or Bylaws of Company or any provisions of, or
result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or
decree to which Company or any Shareholder is a party or by which Company or
any Shareholder is bound, or violate any material restrictions of any kind to
which Company is subject, or result in any lien or encumbrance on any of
Company's assets or the Assets.
<PAGE>
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to
the knowledge of Company and Shareholders, threatened, which may result in
the revocation, cancellation or suspension, or any adverse modification, of
any such licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Company or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been declared or paid by Company on any of its capital stock
since the Balance Sheet Date. No repurchase of any of Company's capital
stock has been approved, effected or is pending, or is contemplated by
Company.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Company and all
amendments thereto have been delivered to Pentegra. The minute books of
Company contain accurate minutes of all meetings of and consents to actions
taken without meetings of the Board of Directors and stockholders of Company
since its formation. The books of account of Company have been kept
accurately in the ordinary course of business and the revenues, expenses,
assets and liabilities of Company have been properly recorded in such books.
2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any
related unaudited statements of income, retained earnings, schedule of
accounts receivable, accounts payable and accrued liabilities, and cash flows
for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Company as of
the dates and for the periods indicated and reflect all fixed and contingent
liabilities of Company.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Company or any Shareholder leases, as lessor or lessee,
real or personal property used in operating the Business, related to the
Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and
enforceable in accordance with their respective terms, and there is not under
any such lease any existing default by Company, as lessor or lessee, or any
condition or event of which any Shareholder or Company has knowledge which
with notice or lapse of time, or both, would constitute a default, in respect
of which Company or Shareholders have not taken adequate steps to cure such
default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Company and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances
set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to the Closing Date and evidence
of such releases of liens and claims shall be provided to Pentegra on the
<PAGE>
Closing Date and the Assets shall not be used to satisfy such liens, claims
or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Company, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Company has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Company, including the names of any entities from whom Company previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Company in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Company has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the name of each director and officer of Company
and the offices held by each, (b) the most recent payroll report of Company,
showing all current employees of Company and their current levels of
compensation, (c) promised increases in compensation of employees of Company
that have not yet been effected, (d) oral or written employment agreements,
consulting agreements or independent contractor agreements (and all
amendments thereto) to which Company is a party, copies of which have been
delivered to Pentegra, and (e) all employee manuals, materials, policies,
procedures and work-related rules, copies of which have been delivered to
Pentegra. Company is in compliance with all applicable laws, rules,
regulations and ordinances respecting employment and employment practices.
Company has not engaged in any unfair labor practice. There are no unfair
labor practices charges or complaints pending or threatened against Company,
and Company has never been a party to any agreement with any union, labor
organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the
Business nor any of the Assets is subject to any pending, nor does Company or
any Shareholder have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Company, any Shareholder, the Business, the Assets or the
transactions contemplated by this Agreement, and, to the knowledge of Company
and Shareholders, no basis for any such action exists, nor is there any legal
impediment of which Company or any Shareholder has knowledge to the continued
operation of its business or the use of the Assets in the ordinary course,
subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Company has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Company ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted or may be made
by any party thereto. Except as indicated on such Exhibits, there is not
under any such Contract any existing default by Company or any Shareholder,
or any condition or event of which Company or any Shareholder has
<PAGE>
knowledge which with notice or lapse of time, or both, would constitute a
default. Company and Shareholders have no knowledge of any default by any
other party to such Contracts. Company and Shareholders have not received
notice of the intention of any party to any Contract to cancel or terminate
any Contract and have no reason to believe that any amendment or change to
any Contract is contemplated by any party thereto. Other than those
contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13
and EXHIBIT 2.15, Company are not a party to any material written or oral
agreement contract, lease or arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
the Company or Shareholders, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Company on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
<PAGE>
(d) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Company since the Balance Sheet
Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(j) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties,
assets or business or the Business or the Assets, or experienced any other
material adverse change in its financial condition, assets, prospects,
liabilities or business;
(n) Declared or paid a distribution, payment or dividend of any
kind on the capital stock of Company;
(o) Repurchased, approved any repurchase or agreed to repurchase
any of Company's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Company has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Company has not received any notice that any tax deficiency or
delinquency has been or may be asserted against Company. There are no
audits relating to taxes of Company pending or in process or, to the
knowledge of Company, threatened. Company is not currently the beneficiary of
any waiver of any statute of limitations in respect of taxes nor of any
extension of time within which to file any tax return or to pay any tax
assessment or deficiency. There are no liens or encumbrances relating to
taxes on or threatened against any of the assets of Company. Company has
withheld and paid all taxes required by law to have been withheld and paid by
it. Neither Company nor any
<PAGE>
predecessor of Company is or has been a party to any tax allocation or
sharing agreement or a member of an affiliated group of corporations filing a
consolidated Federal income tax return. Company has delivered to Pentegra
correct and complete copies of Company's three most recently filed annual
state, local and Federal income tax returns, together with all examination
reports and statements of deficiencies assessed against or agreed to by
Company during the three calendar year period preceding the date of this
Agreement. Company has neither made any payments, is obligated to make any
payments, or is a party to any agreement that under any circumstance could
obligate it to make any payments that will not be deductible under Code
section 280G.
(b) No Shareholder presently intends to dispose of any of the shares of
Pentegra Common Stock to be received hereunder nor is a party to any plan,
arrangement or agreement for the disposition of such shares. Company and
Shareholders have no knowledge, after due inquiry, of any such intent, plan,
arrangement or agreement by any Shareholder. Nothing contained herein shall
prohibit Shareholders from selling such shares of Pentegra Common Stock after
the designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated
by this Agreement which may be now or hereafter asserted against Pentegra,
Company or Company's shareholders resulting from any action taken by Company
or any Shareholder or their respective agents or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Company did not have, as of the Balance Sheet
Date, and has not incurred since that date and will not have incurred as of
the Closing Date, any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
other than those incurred in the ordinary course of business or as set forth
on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable
grounds to know, of any basis for the assertion against Company or any
Shareholder as of the Balance Sheet Date, of any claim or liability of any
nature in any amount not fully reflected or reserved against on the Balance
Sheet, or of any claim or liability of any nature arising since that date
other than those incurred in the ordinary course of business or contemplated
by this Agreement. All indebtedness of Company (including without
limitation, indebtedness for borrowed money, guaranties and capital lease
obligations) is described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed
professional of Company carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the
industry. Valid and enforceable policies in such amounts are outstanding and
duly in force and will remain duly in force through the Closing Date. All
such policies are described in EXHIBIT 2.20 attached hereto and true and
correct copies have been delivered to Pentegra. Neither Shareholders nor
Company have not received notice or other communication from the issuer of
any such insurance policy cancelling or amending such policy or threatening
to do so. Neither Company, nor any Shareholder nor any licensed professional
employee of Company has any outstanding claims, settlements or premiums owed
against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Company has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company
Plan," and collectively "Company Plans") have been operated and administered
in all material respects in
<PAGE>
accordance with all applicable laws, rules and regulations, including without
limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII
of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as
amended, the Age Discrimination in Employment Act of 1967, as amended, and
the related rules and regulations adopted by those Federal agencies
responsible for the administration of such laws. No act or failure to act by
Company has resulted in a "prohibited transaction" (as defined in ERISA) with
respect to the Company Plans. No "reportable event" (as defined in ERISA)
has occurred with respect to any of the Company Plans. Company has not
previously made, is not currently making, and is not obligated in any way to
make, any contributions to any multiemployer plan within the meaning of the
Multi-Employer Pension Plan Amendments Act of 1980. With respect to each
Company Plan, either (i) the value of plan assets (including commitments
under insurance contracts) is at least equal to the value of plan liabilities
or (ii) the value of plan liabilities in excess of plan assets is disclosed
on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Company, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and
Company's licensed professional employees, and the conduct of the Business
and use of the Assets, have complied with all applicable laws, rules,
regulations and licensing requirements, including, without limitation, the
Federal Environmental Protection Act, the Occupational Safety and Health Act,
the Americans with Disabilities Act and any environmental laws and medical
waste laws, and there exist no violations by Company, any Shareholder or any
licensed professional employee of Company of any Federal, state or local law
or regulation. Company and Shareholders have not received any notice of a
violation of any Federal, state and local laws, regulations and ordinances
relating to the operations of the Business and Assets and no notice of any
pending inspection or violation of any such law, regulation or ordinance has
been received by Company.
2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed
professional employee or independent contractor of Company has timely filed
all claims or other reports required to be filed with respect to the purchase
of services by third-party payors, and all such claims or reports are
complete and accurate, and has no liability to any payor with respect
thereto. There are no pending appeals, overpayment determinations,
adjustments, challenges, audit, litigation or notices of intent to open
Medicare or Medicaid claim determinations or other reports required to be
filed by Company, any Shareholder and each licensed professional employee of
Company. Neither Company, nor any Shareholder, nor any licensed professional
employee of Company has been convicted of, or pled guilty or nolo contendere
to, patient abuse or negligence, or any other Medicare or Medicaid program
related offense and none has committed any offense which may serve as the
basis for suspension or exclusion from the Medicare and Medicaid programs or
any other third party payor program. With respect to payors, Company,
Shareholders and Company's licensed professional employees has not (a)
knowingly and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company
or Shareholders in this Agreement, and no Exhibit or certificate issued or
executed by, or information furnished by, officers or directors of Company or
any Shareholder and furnished or to be furnished to Pentegra pursuant hereto,
or in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make the statements or facts contained
<PAGE>
therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Company has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Company, or their respective spouses,
children or affiliates, owns directly or indirectly, on an individual or
joint basis, any interest in, has a compensation or other financial
arrangement with, or serves as an officer or director of, any customer or
supplier or competitor of Company or any organization that has a material
contract or arrangement with Company.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Company's services which
accounted for more than 10% of revenues of Company in the preceding fiscal
year. Company has good relations with all such payors and other material
payors of Company and none of such payors has notified Company that it
intends to discontinue its relationship with Company or to deny any claims
submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Company and Shareholders as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would
not have a material adverse effect, there are no proceedings pending or, to
the
<PAGE>
knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has knowledge to the continued operation of its business or the use
of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the reorganization contemplated
hereby will be as of the Closing Date duly and validly authorized by all
necessary corporate action on the part of Pentegra. The Pentegra Common
Stock to be issued in connection with the reorganization contemplated hereby,
when issued in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Company or any
Shareholder pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, agree that between the
date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall
use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Company
and Shareholders agree to complete the Exhibits hereto to be provided by them
in form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the
Business and use the Assets in the ordinary course. Company and Shareholders
shall not enter into any lease, contract, indebtedness, commitment, purchase
or sale or acquire or dispose of any capital asset relating to the Business
or the Assets except in the ordinary course of business. Company and
Shareholders shall use their best efforts to preserve the Business and Assets
intact and shall not take any action that would have an adverse effect on the
Business or Assets. Company and Shareholders shall use their best efforts to
preserve intact the relationships with payors, customers, suppliers, patients
and others having significant business relations with
<PAGE>
Company. Company and Shareholders shall collect its receivables and pay its
trade payables in the ordinary course of business. Company and Shareholders
shall not introduce any new method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra
and its authorized representatives access to, and make available for
inspection, all of the assets and business of Company, the Business and the
Assets, including employees, customers and suppliers and permit Pentegra and
its authorized representatives to inspect and make copies of all documents,
records and information with respect to the business or assets of Company,
the Business or the Assets as Pentegra or its representatives may request.
Company and Shareholders shall promptly notify Pentegra in writing of (a) any
notice or communication relating to a default or event that, with notice or
lapse of time or both, could become a default, under any contract, commitment
or obligation to which Company is a party or relating to the Business or the
Assets, and (b) any adverse change in Company's or the Business' financial
condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and
Shareholders shall use their best efforts to secure all necessary approvals
and consents of third parties to the consummation of the transactions
contemplated hereby, including consents described on EXHIBIT 2.4. Company
and Shareholders shall use their best efforts to obtain all licenses,
permits, approvals or other authorizations required under any law, rule,
regulation, or otherwise to provide the services of the Practice contemplated
by the Service Agreement and to conduct the intended business of the Practice
and operate the Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance
with the provisions hereof, Company and Shareholders shall not, and shall use
its best efforts to cause Company's employees, agents and representatives not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or
the making or implementation of any proposal or offer, including without
limitation, any proposal or offer to any Shareholder, with respect to a
merger, acquisition, consolidation or similar transaction involving, or the
purchase of all or any significant portion of the assets or any equity
securities of Company or engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person relating to such proposal or offer, and Company and Shareholders will
immediately cease any such activities, discussions or negotiations heretofore
conducted with respect to any of the foregoing. Company and Shareholders
shall immediately notify Pentegra if any such inquiries or proposals are
received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Company or any entity might have any liability whatsoever
arising from any insurance, pension plan, employment tax or similar
liability of Company to any employee or other person or entity (including,
without limitation, any Company Plan and any liability under employment
contracts with Company) allocable to services performed prior to the Closing
Date. Company and Shareholders acknowledge that the purpose and intent of
this covenant is to assure that Pentegra shall have no unfunded liability
whatsoever at any time after the Closing Date with respect to any of
Company's employees or similar persons or entities, including, without
limitation, any Company Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Company shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash
compensation of any Shareholder (other than in the ordinary course of
business) or other employee or an independent contractor of Company, adopt,
amend or terminate any compensation plan, employment agreement, independent
contractor agreement, employee policies and procedures or employee benefit
plan, take any action that could deplete the assets of any employee benefit,
or fail to pay any premium or contribution due or file any report with
respect to any employee benefit plan, or take any other actions with respect
to its employees or employee matters which might have an adverse effect upon
Company, its business, assets or prospects.
<PAGE>
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Company, nor will any repurchase of any
of Company's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall
use their best efforts to take, or cause to be taken, all actions necessary to
effect the reorganization contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change
in any material respect the tax or financial accounting methods or practices
followed by Company (including any material change in any assumption underlying,
or any method of calculating, any bad debt, contingency or other reserve),
except as may be required by law or generally accepted accounting principles.
Company and Shareholders will duly, accurately and timely (without regard to any
extensions of time) file all returns, information statements and other documents
relating to taxes of Company required to be filed by it, and pay all taxes
required to be paid by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Company hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Company and Shareholders covenant and agree that all of the
creditors with respect to the Business and the Assets will be paid in full by
Company prior to the Closing Date, except to extent that any liability to such
creditors is assumed by Pentegra pursuant to this Agreement. If required by
Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment
of all creditors with respect to the Business and the Assets. Notwithstanding
the foregoing, Company and Shareholders may dispute the validity or amount of
any such creditor's claim without being deemed to be in violation of this
SECTION 4.11, provided that such dispute is in good faith and does not
unreasonably delay the resolution of the claim and provided, further that
Company and Shareholders agree to indemnify and bond Pentegra for such amounts
as is satisfactory to Pentegra.
4.12 LEASE. If Company leases any of its premises from any Shareholder or
other affiliate of Company or any shareholder of Company, Pentegra shall have
entered into a building lease (the "Building Lease") with the owner of such
premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, (i) a five year initial
term plus three five-year renewal options, (ii) a lease rate equal to the fair
market value lease rate, as agreed to by Pentegra, and (iii) such other
provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with
all requests made by Pentegra for the purpose of allowing Pentegra to hire those
non-dentist employees of Company designated by Pentegra, such employment to be
effective as of the Closing Date. Notwithstanding the above, Company and
Shareholders shall remain liable under any Company Plans for any claims incurred
by any employees or their spouses or dependents, and for all compensation,
bonuses, benefits and other such items and other liabilities related to
Company's employees incurred by Company prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all
employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be
treated as "leased employees" (as defined in Code Section 414(n)) of Company and
shall be treated as Clinic employees for purposes of eligibility and
participation in Company Plans.
4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective as
of the Closing Date.
4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a
limited liability company,
<PAGE>
partnership or other legal entity (the "Practice") approved by Pentegra for
the purpose of practicing dentistry and entering into the Service Agreement.
The Practice shall be duly organized, in existing and in good standing under
the laws of the State in which the practice of dentistry is conducted by the
Shareholders and the Practice. The Practice shall have all necessary power
to own all of its assets and to carry on its business as such business is now
being conducted. The Shareholders shall be the sole
member/shareholder/partner of the Practice and own all such interests free of
all security interests, claims, encumbrances and liens. Each interest in the
Practice shall be legally and validly issued and fully paid and
nonassessable. There shall be no outstanding (a) bonds, debentures, notes or
other obligations the holders of which have the right to vote with the
members/partners/shareholders of the Practice on any matter, (b) securities
of the Practice convertible into equity interests in the Practice, or (c)
commitments, options, rights or warrants to issue any such equity interests
in the Practice, to issue securities of the Practice convertible into such
equity interests, or to redeem any securities of the Practice. No interests
of the Practice shall have been issued or disposed of in violation of the
preemptive rights, rights of first refusal or similar rights of any of the
Practice's members/partners/shareholders. The Practice shall quality to do
business as a foreign entity in any other state or jurisdiction by reason of
its business, properties or activities in or relating to such other state or
jurisdiction. The Company shall have transferred the Excluded Assets set
forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to
assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for
equity interest in the Practice, and the Company shall have distributed such
equity interests in the Practice to the Shareholders.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations
and minutes of the Practice and all amendments thereto of the Practice shall
have been delivered to Pentegra and shall be in form and substance satisfactory
to Pentegra. The minute books of the Practice shall contain all accurate
minutes of the meetings of and consents to actions taken without meetings of the
members\managers/partners/board of directors of the Practice since its
formation. The books of account of the Practice shall have been kept accurately
in the ordinary course of business and the revenues, expenses, assets and
liabilities of the Practice shall have been properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements and
other documents to be executed and delivered by it pursuant to this Agreement,
including without limitation, the Service Agreement and each Employment
Agreement or to be executed and delivered on the Closing Date, and has taken all
action required by law, its Organization/Partnership Agreement/Articles of
Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution,
delivery and performance of such documents. The Service Agreement, the
Employment Agreement and the other agreements contemplated hereby shall have
been duly executed and delivered by the Practice and constitute or will
constitute the legal, valid and binding obligations of the Practice enforceable
against the Practice in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of the Service Agreement, the Employment Agreements and
the other agreements contemplated hereby will not violate any provision of the
organizational documents of the Practice or any provisions of, or result in the
acceleration of, any obligation under any mortgage, lien, lease, agreement,
rent, instrument, order, arbitration award, judgment or decree to which the
Practice is a party or by which the Practice is bound, or violate any material
restrictions of any kind to which the Practice is subject, or result in any lien
or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws,
<PAGE>
regulations and licensing requirements and have filed with the proper
authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS.
Pentegra, Shareholders and Company agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall
cooperate to promptly prepare and file with the Securities Exchange Commission
("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to
be filed by Pentegra in connection with its Initial Public Offering (including
the prospectus constituting a part thereof, the "Registration Statement").
Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits
and approvals required to carry out the transactions contemplated by this
Agreement and the Company and Shareholders shall furnish all information
concerning Company and Shareholders as may be reasonable requested in connection
with any such action.
Company and Shareholder represent and warrant that none of the information
or documents supplied or to be supplied by it specifically for inclusion in the
Registration Statement, by exhibit or otherwise, will, at the time the
Registration Statement and each amendment or supplement thereto, if any, becomes
effective under the Securities Act of 1933, 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, in light of the circumstances under
which they were made, not misleading. Company and Shareholders shall be
entitled to review the Registration Statement and each amendment thereto, if
any, prior to the time each becomes effective under the Securities Act of 1933.
Company and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by Pentegra
in connection with the preparation of the Registration Statement and each
amendment or supplement thereto, or any other statement, filing, notice or
application made by or on behalf of each such party or any of its subsidiaries
to any governmental entity in connection with the transactions contemplated by
the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at or
prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Company and
<PAGE>
Shareholders contained herein shall have been true and correct in all
respects when initially made and shall be true and correct in all respects as
of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Company and Shareholders prior to
the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Company shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Company, the Business and the Assets, the results of which shall
be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service Agreement"),
in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which
Pentegra will provide management services to the Practice. Each Shareholder
shall have executed and delivered a Guaranty Agreement in substantially the form
attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder
shall, among other things, guaranty the obligations of the Practice under the
Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused
each shareholder of Company that has an existing employment agreement with
Company to have terminated his or her employment agreement with Company and
shall have executed an employment agreement ("Employment Agreement") with the
Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise
satisfactory to Company and Pentegra.
7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained
all necessary government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly
executed in form satisfactory to Pentegra and its counsel, referred to in
SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or
payables between Company and its shareholders or affiliates and Company shall
not have any liabilities, including indebtedness, guaranties and capital leases,
that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an
additional insured on their liability insurance program in accordance with
SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Company since the Balance Sheet Date.
<PAGE>
7.14 SECURITIES APPROVAL. 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.
At or prior to the date that the Registration Statement is declared effective by
the SEC, Pentegra shall have received all state securities and "Blue Sky"
permits necessary to consummate the transactions contemplated hereby. The
Pentegra Common Stock shall have been approved for listing on Nasdaq or other
exchange selected by Pentegra, subject only to official notification of
issuance.
SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Company and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Pentegra contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Company shall have received all documents, duly
executed in form satisfactory to Company and its counsel, referred to in SECTION
9.2.
8.5 SECURITIES APPROVAL. 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.
At or prior to the date that the Registration Statement is declared effective by
the SEC, Pentegra shall have received all state securities and "Blue Sky"
permits necessary to consummate the transactions contemplated hereby. The
Pentegra Common Stock shall have been approved for listing on Nasdaq or other
exchange selected by Pentegra, subject only to official notification of
issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days
after requested by Pentegra, Company and Shareholders shall deliver to Pentegra
the following, all of which shall be in a form satisfactory to counsel to
Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in
escrow pending Closing, pursuant to an escrow agreement or letter agreement in
form and substance mutually acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals of
all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
<PAGE>
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of Company
authorizing the execution, delivery and performance of this Agreement, the
Service Agreement, the Employment Agreements and all related documents and
agreements each certified by the Secretary as being true and correct copies of
the original thereof;
(d) executed merger certificate and/or plan as required by applicable
state law;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra and the original stock certificates together
with blank stock powers representing the outstanding shares of Company common
stock;
(f) certificates of the Shareholders and a duly authorized officer of
Company dated as of the Closing Date, (i) as to the truth and correctness of the
representations and warranties of Company and Shareholder contained herein; (ii)
as to the performance of and compliance by Company and Shareholder with all
covenants contained herein; and (iii) certifying that all conditions precedent
of Company and Shareholders to the Closing have been satisfied;
(g) a certificate of the Secretary of Company certifying as to the
incumbency of the directors and officers of Company and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Company;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Company and any state of required
foreign qualification of Company establishing that Company is in existence and
is in good standing to transact business in its state of incorporation;
(i) an opinion of counsel to Company and Shareholder opining as to
the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Company, the enforceability of this Agreement and the other agreements and
documents to be executed in connection herewith, and other matters reasonably
requested by Pentegra;
(j) non-foreign affidavits executed by Company;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall
deliver to Company and Shareholders, the following, all of which shall be in a
form satisfactory to counsel to Company and Shareholders and shall be held by
Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing,
pursuant to an escrow agreement or letter agreement in form and substance
mutually acceptable to the parties hereto:
(a) the Merger Consideration;
<PAGE>
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance of
this Agreement and all related documents and agreements each certified by the
Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii) certifying
that all conditions precedent of Pentegra to the Closing have been satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and the
State of incorporation of Company;
(h) an opinion of counsel to Pentegra opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Pentegra, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Company;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Company to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in
any Exhibit attached hereto, any agreement executed pursuant hereto, and any
certificate executed and delivered by any party pursuant to the terms of this
Agreement, shall constitute representations and warranties of Company and
Shareholders, jointly and severally, or of Pentegra, as the case may be. All
such representations and warranties, and all representations and warranties
expressly labeled as such in this Agreement shall survive the date of this
Agreement and the Closing Date for a period of five (5) years following the
Closing Date, except that (i) the representations and warranties with respect to
environmental and medical waste laws and health care laws and matters shall
survive for a period of fifteen (15) years and tax representations shall survive
until one year after the expiration of the applicable statute of limitations.
Each party covenants with the other parties not to make any claim with respect
to such representations and warranties, against any party after the date on
which such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless
such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4
hereof, as the case may be. Each party hereby releases, acquits and discharges
the other party from any and all claims and demands, actions and causes of
action, damages, costs, expenses and rights of setoff with respect to which the
notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely
provided.
<PAGE>
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2
AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS
FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS,
COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES
AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY
PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF,
OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR
TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3
AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND
SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS,
DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND
EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH
RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO
<PAGE>
BE FURNISHED BY INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER
THE CLOSING DATE,
(D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS
GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING
OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO
CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY
RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A
RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE
NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND
PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS
SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION
STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR
SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED
OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS
SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives
<PAGE>
written notice of the commencement of any action or other proceeding in
respect of which indemnification or reimbursement may be sought hereunder, or
within such lesser time as may be provided by law for the defense of such
action or proceeding, such Indemnified Person shall notify Indemnitor
thereof. If any such action or other proceeding shall be brought against any
Indemnified Person, Indemnitor shall, upon written notice given within a
reasonable time following receipt by Indemnitor of such notice from
Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Company or any Shareholder or Pentegra
giving rise to indemnification under SECTION 10.2, 10.3 or SECTION 10.4 hereof,
Pentegra, Contributor or Shareholder, as applicable, shall be entitled to offset
the amount of damages incurred by it as a result of such breach of warranty,
representation, covenant or agreement against any amounts payable by Pentegra,
Contributor or Shareholder, as applicable, including the amounts payable under
the Service Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of Company
or any Shareholder contained in this Agreement or in any certificate or other
document executed and delivered by Company or any Shareholder pursuant to this
Agreement is or becomes untrue or breached in any material respect or if Company
or any Shareholder fails to comply in any material respect with any covenant or
agreement contained herein, and any such misrepresentation, noncompliance or
breach is not cured, waived or eliminated within twenty (20) days after receipt
of written notice thereof;
(c) at any time by Company or any Shareholder if any representation or
warranty of Pentegra contained in this Agreement or in any certificate or other
document executed and delivered by Pentegra pursuant to this Agreement is or
becomes untrue or breached in any material respect or if Pentegra fails to
comply in any material respect with any covenant or agreement contained herein
and such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
(d) by Pentegra, Shareholders or Company if the transaction contemplated
hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Company, that such termination is
<PAGE>
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date,
Shareholder shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of
Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer shall
be treated as effective for any purpose or (b) engage in any transaction,
whether or not with respect to any shares of Pentegra Common Stock or any
interest therein, the intent or effect of which is to reduce the risk of owning
shares of Pentegra Common Stock. The certificates evidencing the Pentegra
Common Stock delivered to Company pursuant to the terms hereof will bear a
legend substantially in the form set forth below and containing such other
information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the
shares of Pentegra Common Stock to be delivered to Company pursuant to this
Agreement have not been and will not be registered under the Securities Act of
1933 and may not be resold without compliance with the Securities Act of 1933.
The Pentegra Common Stock to be acquired by Shareholders pursuant to this
Agreement is being acquired solely for its own account, for investment purposes
only and with no present intention of distributing, selling or otherwise
disposing of it in connection with a distribution. Each Shareholder covenants,
warrants and represents that none of the shares of Pentegra Common Stock issued
to it will be offered, sold, assigned, pledged, hypothecated, transferred or
otherwise disposed of except after full compliance with all of the applicable
provisions of the Securities Act, as amended, and the rules and regulations of
the Securities Exchange Commission and applicable state securities laws and
regulations. All certificates evidencing shares of Pentegra Common Stock shall
bear the following legend in addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Company resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the
economic risk of an investment in Pentegra Common Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and
have such knowledge and experience in financial and business matters that they
are capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect their own interests in connection with
the acquisition of the Pentegra Common Stock. Shareholders and their
representatives have had an adequate opportunity to ask questions and receive
answers from the officers of Pentegra concerning any and all matters relating to
the background and experience of the officers
<PAGE>
and directors of Pentegra, the plans for the operations of the business of
Pentegra, and any plans for additional acquisitions and the like.
Shareholders and their representatives have asked any and all questions in
the nature described in the preceding sentence and all questions have been
answered to their satisfaction. Shareholders are "accredited investors" as
defined in Regulation D of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Company and Shareholders agree that it will not disclose
such confidential information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, unless (i) such information
becomes available to or known by the public generally through no fault of
Company or Shareholders, (ii) disclosure is required by law or the order of any
governmental authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (ii), Company and Shareholders shall, if
possible, give prior written notice thereof to the other parties hereto, and
provide such other parties hereto with the opportunity to contest such
disclosure, (iii) Company and Shareholders reasonably believe that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party, or (iv) Company and Shareholders are the sole and exclusive
owner of such confidential information as a result of the transactions
contemplated hereunder or otherwise. In the event of a breach or threatened
breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra
shall be entitled to an injunction restraining Company and Shareholders from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting Pentegra from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
The obligations of the parties under this SECTION 13 shall survive the
termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement will qualify as a reorganization within the meaning of Section
368(a) of the Code. The tax returns (and schedules thereto) of Shareholders,
Company and Pentegra shall be filed in a manner consistent with such intention
and Shareholders and Pentegra shall each provide the other with such tax
information, reports, returns or schedules as may be reasonably required to
assist the other in so reporting the transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery, or by
facsimile AND overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
<PAGE>
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Company and Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this Agreement,
whether or not such transactions are consummated. Without limiting the
generality of the foregoing and whether or not such liabilities may be deemed to
have been incurred in the ordinary course of business, Pentegra shall not be
liable to or required to pay, either directly or indirectly, any fees and
expenses of legal counsel, accountants, auditors or other persons or entities
retained by Company or any Shareholder for services rendered in connection with
negotiating and closing the transactions contemplated by this Agreement or the
documents to be executed in connection herewith, whether or not such costs or
expenses are incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure, either
written or oral, regarding the transactions contemplated by this Agreement
without the prior written consent of the other party, provided that the
foregoing shall not prohibit any disclosure (a) by press release, filing or
otherwise that Pentegra has determined in good faith judgment to be required by
Federal securities laws or the rules of the National Association of Securities
Dealers, (b) to attorneys, accountants, investment bankers or other agents of
the parties assisting the parties in connection with the transactions
contemplated by this Agreement, and (c) by Pentegra in connection with the
conduct of its Initial Public Offering and conducting an examination of the
operations and assets of Company.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are
integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and not
only in connection with the specific representation in which they are explicitly
referenced.
<PAGE>
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS
ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY
AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR
ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one and the same
instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any entity
that, through one or more intermediaries is, controlled, controlled by or under
common control with, Pentegra. Upon any such assignment prior to the Closing,
all references herein to Pentegra (including those to Pentegra Common Stock)
shall be deemed to include references to the assignee and the assignee's common
stock. Notwithstanding any such assignment, Pentegra shall not, absent a
written release from Company, be relieved from its obligations to Company under
this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Company, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Company and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Company or may demand from Company, and Company agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing, and
signed by the parties hereto. The waiver of any of the terms and conditions of
this Agreement shall not be construed as a waiver of any other terms and
conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Companys or Shareholders (hereinafter referred to as a "Party"), whether made
before or after the institution of any legal proceeding, any dispute among the
parties hereto in any way arising out of, related to, or in connection with
this Agreement (hereinafter a "Dispute"), shall be resolved by binding
arbitration in accordance with the terms of this Section (hereinafter the
"Arbitration Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in accordance
with the terms of this Arbitration Program, the Commercial
<PAGE>
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been completed
and the arbitrators have determined each party's post-arbitration obligations
and responsibilities as it relates to such warranties and covenants. No
provision of, nor the exercise of any rights under, this Arbitration Program
shall limit the right of any Party at any time to seek or use ancillary or
preliminary judicial or non-judicial self help remedies for the purposes of
obtaining, perfecting, preserving, or foreclosing upon any personal property in
which there has been granted a security interest or lien by a Party in the
Documents. In Disputes involving indebtedness or other monetary obligations,
each Party agrees that the other Party may proceed against all liable persons,
jointly and severally against one or more of them, without impairing rights
against other liable persons. Nor shall a Party be required to join the
principal obligor or any other liable persons (e.g., sureties or guarantors) in
any proceeding against a particular person. A Party may release or settle with
one or more liable persons as the Party deems fit without releasing or impairing
rights to proceed against any persons not so released. All statutes of
limitation that would otherwise be applicable shall apply to any arbitration
proceeding.
The party seeking arbitration shall notify the other Party, in writing, of
that Party's desire to arbitrate a dispute; and each Party shall, within twenty
(20) days from the date such notification is received, select an arbitrator, and
those two arbitrators shall select a third arbitrator within ten (10) days
thereafter. The issues or claims in dispute shall be committed to writing,
separately stated and numbered, and each party's proposed answers or contentions
shall be signed below the questions. Failure by a party to select an arbitrator
within the prescribed time period shall serve as that Party's acquiescence and
acceptance of the other party's selection of arbitrator. The arbitrators shall
resolve all Disputes in accordance with the applicable substantive law. Any
Dispute shall be decided by a majority vote of three arbitrators, unless the
claim or amount in controversy does not exceed $100,000.00, in which case a
single arbitrator (who shall have authority to render a maximum award of
$100,000.00, including all damages of any kind, costs and fees) may decide the
Dispute. The arbitrators may grant any remedy or relief that the arbitrators
deem just and equitable and within the scope of this Arbitration Program. The
arbitrators may also grant such ancillary relief as is necessary to make
effective the award. In all arbitration proceedings the arbitrators shall make
specific and written findings of fact and conclusions of law. In all
arbitration proceedings in which the amount in controversy exceeds $100,000.00,
in the aggregate, the Parties shall have in addition to the statutory right to
seek vacation or modification of any award pursuant to applicable law, the right
to seek vacation or modification of any award that is based in whole, or in
part, on an incorrect or erroneous ruling of law by appeal to an appropriate
court having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must be
filed in a court having jurisdiction over the Dispute within 15 days from the
date the award in rendered. The arbitrators' findings of fact shall be binding
on all Parties and shall not be subject to further review except as otherwise
allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in writing
by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the
headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this
Arbitration Program shall survive any termination, amendment, or expiration of
the Documents, unless the Parties otherwise expressly agree in writing making
specific reference to this Arbitration Program. To the extent permitted by
applicable law, the arbitrator shall have the power to award recovery of all
costs and fees (including attorney's fees, administrative fees, and arbitrators'
fees) to the prevailing Party. This Arbitration Program may be amended,
changed, or modified only by a writing which specifically refers to this
Arbitration Program and which is signed by all the Parties. If any term,
covenant, condition or provision of the Arbitration Program is found to be
unlawful or invalid or unenforceable, such illegality or invalidity or
unenforceable shall not affect the legality, validity or enforceability of the
remaining parts of this Arbitration Program, and all such remaining parts hereof
shall be valid and enforceable and have full force and effect as if the illegal,
invalid or unenforceable part had not been included. Each Party agrees to keep
all Disputes and arbitration proceedings strictly confidential, except for
disclosures of information required in the
<PAGE>
ordinary course of business of the Parties or by applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be found
to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect. In lieu of such
provision, there shall be added automatically as part of this Agreement, a
provision as similar in its terms to such provision as may be possible and be
legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
LOUIS J. THORNLEY, D.D.S., P.C.
By: /s/ Louis J. Thornley, D.D.S.
-----------------------------------
Its: Pres
----------------------------------
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
-----------------------------------
Its: Senior Vice President
----------------------------------
/s/ Louis J. Thornley, D.D.S.
------------------------------------
Louis J. Thornley, DDS
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
- ------- -----------
Annex I Merger Consideration
A Target Companies
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
4.16 Excluded Assets and Excluded Liabilities
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
S. VICTOR UHRENHOLDT., D.D.S., P.C.
and
S. Victor Uhrenholdt, D.D.S.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . 3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . . 8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Section 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . . 12
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . 12
Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 13
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . . 13
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . 13
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 14
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS . . . . . . . . . . . . . . 17
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . 18
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . . 20
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . 22
14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed
as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra"), S. Victor Uhrenholdt, D.D.S., P.C.
("Contributor") and S. Victor Uhrenholdt, D.D.S., shareholders of Contributor
(referred to herein as "Shareholder" or "Shareholders").
WITNESSETH:
WHEREAS, Contributor operates a dental practice ("Business") and Pentegra
is engaged in the business of managing certain non-dentistry aspects of
dental practices;
WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra
desires to receive from Contributor, certain assets of Contributor;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Contributor, the "Target
Companies");
WHEREAS, it is intended for Federal income tax purposes that the
transfers contemplated by this Agreement, the Other Agreements and Pentegra's
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an
exchange within the meaning of Section 351 of the Internal Revenue Code of
1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and
conditions contained herein, on the Closing Date, Contributor shall convey,
transfer, deliver and assign to Pentegra or any affiliate of Pentegra
designated by Pentegra all of Contributor's right, title and interest in and
to those certain assets described on EXHIBIT 1.1 attached hereto
(individually, "Asset", and collectively "Assets"), free and clear of all
obligations, security interests, claims, liens and encumbrances, except as
specifically assumed, or taken subject to, by Pentegra pursuant to SECTION
1.3(b) hereof.
<PAGE>
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and contributed hereunder, and Contributor shall retain all of
its right, title and interest in and to, the assets not specifically
transferred hereunder, including without limitation, the assets described on
EXHIBIT 1.2 (the "Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Contributor
contained herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Contributor the consideration
specified in ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Contributor listed on EXHIBIT
1.3(b) attached hereto to the extent that such obligations, commitments,
liabilities and indebtedness are current and not otherwise in default. (the
"Assumed Liabilities"). Notwithstanding any contrary provision contained
herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra
assume: (i) any liability, commitment or obligation or trade payable or
indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability
set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of
or default under such contracts, leases, commitments or obligations which
occurred on or before the Closing Date; (iii) any liability for any employee
benefits payable to employees of Contributor, including, but not limited to,
liabilities arising under any Contributor Plan (as defined in SECTION 2.21
hereof); (iv) any liability based upon or arising out of a violation of any
antitrust or similar restraint-of-trade laws by any Shareholder or
Contributor, including, without limiting the generality of the foregoing, any
such antitrust liability which may arise in connection with agreements,
contracts, commitments or orders for the sale of goods or provision of
services by Contributor reflected on the books of Contributor at or prior to
the Closing Date; (v) any liability based upon or arising out of any tortious
or wrongful actions of Contributor, any licensed professional employee or
independent contractor of Contributor or any Shareholder, (vi) any liability
for the payment of any taxes of Contributor or any Shareholder, including
without limitation, sales, use and other transfer taxes and income taxes
arising from or by reason of the transactions contemplated by this Agreement;
(vii) any indebtedness secured by deeds of trust or mortgages on real
property; nor (viii) any liability incurred or to be incurred pursuant to any
malpractice or other suits or actions pending against Contributor or any
Shareholder.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement,
Contributor and Shareholders shall execute and deliver all such deeds, bills
of sale, assignments and assurances and take and do all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any
and all right, title and interest in, to and under the Assets in Pentegra or
otherwise to carry out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS.
Contributor and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Contributor is a professional
corporation or association, as applicable, duly organized, validly existing
and in good standing under the laws of the State of Texas. Contributor has
all necessary corporate powers to own all of its assets and to carry on its
business as such business is now being conducted. Contributor does not own
stock in or control, directly or indirectly,
<PAGE>
any other corporation, association or business organization, nor is
Contributor a party to any joint venture or partnership. The Shareholders are
the sole shareholders of Contributor and own all outstanding shares of
capital stock free of all security interests, claims, encumbrances and liens
in the amounts set forth on EXHIBIT 2.1. Each share of Contributor's common
stock has been legally and validly issued and fully paid and nonassessable.
No shares of capital stock of Contributor are owned by Contributor in
treasury. There are no outstanding (a) bonds, debentures, notes or other
obligations the holders of which have the right to vote with the stockholders
of Contributor on any matter, (b) securities of Contributor convertible into
equity interests in Contributor, or (c) commitments, options, rights or
warrants to issue any such equity interests in Contributor, to issue
securities of Contributor convertible into such equity interests, or to
redeem any securities of Contributor. No shares of capital stock of
Contributor have been issued or disposed of in violation of the preemptive
rights, rights of first refusal or similar rights of any of Contributor's
stockholders. Contributor is not required to qualify to do business as a
foreign corporation in any other state or jurisdiction by reason of its
business, properties or activities in or relating to such other state or
jurisdiction. Contributor does not have any assets, employees or offices in
any state other than the state set forth in the first sentence of this
SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the corporate
power to execute, deliver and perform this Agreement and all agreements and
other documents executed and delivered by it pursuant to this Agreement or to
be executed and delivered on the Closing Date, and has taken all action
required by law, its Articles or Certificate of Incorporation, its Bylaws or
otherwise, to authorize the execution, delivery and performance of this
Agreement and such related documents. Each Shareholder has the legal
capacity to enter into and perform this Agreement and the other agreements to
be executed and delivered in connection herewith. Contributor has obtained
the approval of its stockholders necessary to the consummation of the
transactions contemplated herein. This Agreement and all agreements and
documents executed and delivered in connection herewith have been, or will be
as of the Closing Date, duly executed and delivered by Contributor and
Shareholders, as appropriate, and constitute or will constitute the legal,
valid and binding obligations of Contributor and Shareholders, enforceable
against Contributor and Shareholders in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally or the availability of
equitable remedies. The execution and delivery of this Agreement, and the
agreements executed and delivered pursuant to this Agreement or to be
executed and delivered on the Closing Date, do not, and, subject to the
receipt of consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, violate any provision of the Articles or
Certificate of Incorporation or Bylaws of Contributor or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or
decree to which Contributor or any Shareholder is a party or by which
Contributor or any Shareholder is bound, or violate any material restrictions
of any kind to which Contributor is subject, or result in any lien or
encumbrance on any of Contributor's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to
the knowledge of Contributor and Shareholders, threatened, which may result
in the revocation, cancellation or suspension, or any adverse modification,
of any such licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Contributor or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been
<PAGE>
declared or paid by Contributor on any of its capital stock since the Balance
Sheet Date. No repurchase of any of Contributor's capital stock has been
approved, effected or is pending, or is contemplated by Contributor.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Contributor and all
amendments thereto have been delivered to Pentegra. The minute books of
Contributor contain accurate minutes of all meetings of and consents to
actions taken without meetings of the Board of Directors and stockholders of
Contributor since its formation. The books of account of Contributor have
been kept accurately in the ordinary course of business and the revenues,
expenses, assets and liabilities of Contributor have been properly recorded
in such books.
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore
furnished Pentegra with copies of its unaudited balance sheet and related
unaudited statements of income, retained earnings and cash flows for its
prior two full fiscal years, as well as copies of its unaudited balance sheet
as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet"
and the latest date thereof shall be referred to as the "Balance Sheet Date")
and any related unaudited statements of income, retained earnings, schedule
of accounts receivable, accounts payable and accrued liabilities, and cash
flows for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Contributor as
of the dates and for the periods indicated and reflect all fixed and
contingent liabilities of Contributor.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Contributor or any Shareholder leases, as lessor or lessee,
real or personal property used in operating the Business, related to the
Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and
enforceable in accordance with their respective terms, and there is not under
any such lease any existing default by Contributor, as lessor or lessee, or
any condition or event of which any Shareholder or Contributor has knowledge
which with notice or lapse of time, or both, would constitute a default, in
respect of which Contributor or Shareholders have not taken adequate steps to
cure such default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Contributor and Shareholders have
no knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good, valid
and marketable title to all of the Assets, free and clear of any liens,
claims, charges, exceptions or encumbrances, except for those, if any, which
are set forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all
encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances
indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the
Closing Date and evidence of such releases of liens and claims shall be
provided to Pentegra on the Closing Date and the Assets shall not be used to
satisfy such liens, claims or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Contributor, are in good, current, standard and merchantable
condition and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Contributor has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Contributor, including the names of any entities from whom Contributor
previously acquired significant assets. Except for off-the-shelf software
licenses and except as set forth on EXHIBIT 2.12, Contributor is not a
licensee in respect of any patents, trademarks, service marks, trade names,
copyrights or
<PAGE>
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Contributor
in connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Contributor has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the name of each director and officer of
Contributor and the offices held by each, (b) the most recent payroll report
of Contributor, showing all current employees of Contributor and their
current levels of compensation, (c) promised increases in compensation of
employees of Contributor that have not yet been effected, (d) oral or written
employment agreements, consulting agreements or independent contractor
agreements (and all amendments thereto) to which Contributor is a party,
copies of which have been delivered to Pentegra, and (e) all employee
manuals, materials, policies, procedures and work-related rules, copies of
which have been delivered to Pentegra. Contributor is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Contributor has not engaged in any unfair labor
practice. There are no unfair labor practices charges or complaints pending
or threatened against Contributor, and Contributor has never been a party to
any agreement with any union, labor organization or collective bargaining
unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Contributor nor the
Business nor any of the Assets is subject to any pending, nor does
Contributor or any Shareholder have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Contributor, any Shareholder, the Business, the
Assets or the transactions contemplated by this Agreement, and, to the
knowledge of Contributor and Shareholders, no basis for any such action
exists, nor is there any legal impediment of which Contributor or any
Shareholder has knowledge to the continued operation of its business or the
use of the Assets in the ordinary course, subject to consents set forth on
EXHIBIT 2.4.
2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Contributor ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted or may be made
by any party thereto. Except as indicated on such Exhibits, there is not
under any such Contract any existing default by Contributor or any
Shareholder, or any condition or event of which Contributor or any
Shareholder has knowledge which with notice or lapse of time, or both, would
constitute a default. Contributor and Shareholders have no knowledge of any
default by any other party to such Contracts. Contributor and Shareholders
have not received notice of the intention of any party to any Contract to
cancel or terminate any Contract and have no reason to believe that any
amendment or change to any Contract is contemplated by any party thereto.
Other than those contracts, obligations and commitments listed on EXHIBIT
2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Contributor are not a party to any
material written or oral agreement contract, lease or arrangement, including
without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
<PAGE>
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
the Contributor or Shareholders, oral or written, that provide for
prepayments or deferred installment payments; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Contributor on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16,
Contributor has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(d) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Contributor since the Balance
Sheet Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
<PAGE>
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(j) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties,
assets or business or the Business or the Assets, or experienced any other
material adverse change in its financial condition, assets, prospects,
liabilities or business;
(n) Declared or paid a distribution, payment or dividend of any
kind on the capital stock of Contributor;
(o) Repurchased, approved any repurchase or agreed to repurchase
any of Contributor's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Contributor has filed all tax returns (including tax
reports and other statements) required to have been filed by it, and has paid
all taxes (including any interest, penalty or additions thereto) required to
have been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Contributor has not received any notice that any tax deficiency
or delinquency has been or may be asserted against Contributor. There are
no audits relating to taxes of Contributor pending or in process or, to the
knowledge of Contributor, threatened. Contributor is not currently the
beneficiary of any waiver of any statute of limitations in respect of taxes
nor of any extension of time within which to file any tax return or to pay
any tax assessment or deficiency. There are no liens or encumbrances
relating to taxes on or threatened against any of the assets of Contributor.
Contributor has withheld and paid all taxes required by law to have been
withheld and paid by it. Neither Contributor nor any predecessor of
Contributor is or has been a party to any tax allocation or sharing agreement
or a member of an affiliated group of corporations filing a consolidated
Federal income tax return. Contributor has delivered to Pentegra correct and
complete copies of Contributor's three most recently filed annual state,
local and Federal income tax returns, together with all examination reports
and statements of deficiencies assessed against or agreed to by Contributor
during the three calendar year period preceding the date of this Agreement.
Contributor has neither made any payments, is obligated to make any payments,
or is a party to any agreement that under any circumstance could obligate it
to make any payments that will not be deductible under Code section 280G.
(b) Contributor does not intend to dispose of any of the shares of
Pentegra Common Stock to be received hereunder and is not a party to any
plan, arrangement or agreement for the disposition of such shares.
<PAGE>
Contributor and Shareholders have no knowledge, after due inquiry, of any
such intent, plan, arrangement or agreement by any Shareholder. Nothing
contained herein shall prohibit Contributor from selling such shares of
Pentegra Common Stock after the designated holding period and in accordance
with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated
by this Agreement which may be now or hereafter asserted against Pentegra,
Contributor or Contributor's shareholders resulting from any action taken by
Contributor or any Shareholder or their respective agents or employees, or
any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Contributor did not have, as of the Balance
Sheet Date, and has not incurred since that date and will not have incurred
as of the Closing Date, any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
other than those incurred in the ordinary course of business or as set forth
on EXHIBIT 2.16. Contributor and Shareholders do not know, or have
reasonable grounds to know, of any basis for the assertion against
Contributor or any Shareholder as of the Balance Sheet Date, of any claim or
liability of any nature in any amount not fully reflected or reserved against
on the Balance Sheet, or of any claim or liability of any nature arising
since that date other than those incurred in the ordinary course of business
or contemplated by this Agreement. All indebtedness of Contributor
(including without limitation, indebtedness for borrowed money, guaranties
and capital lease obligations) is described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Contributor, each Shareholder and each licensed
professional of Contributor carries property, liability, malpractice,
workers' compensation and such other types of insurance as is customary in
the industry. Valid and enforceable policies in such amounts are outstanding
and duly in force and will remain duly in force through the Closing Date.
All such policies are described in EXHIBIT 2.20 attached hereto and true and
correct copies have been delivered to Pentegra. Neither Shareholders nor
Contributor have not received notice or other communication from the issuer
of any such insurance policy cancelling or amending such policy or
threatening to do so. Neither Contributor, nor any Shareholder nor any
licensed professional employee of Contributor has any outstanding claims,
settlements or premiums owed against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Contributor has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Contributor
Plan," and collectively "Contributor Plans") have been operated and
administered in all material respects in accordance with all applicable laws,
rules and regulations, including without limitation, ERISA, the Internal
Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964,
as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in
Employment Act of 1967, as amended, and the related rules and regulations
adopted by those Federal agencies responsible for the administration of such
laws. No act or failure to act by Contributor has resulted in a "prohibited
transaction" (as defined in ERISA) with respect to the Contributor Plans. No
"reportable event" (as defined in ERISA) has occurred with respect to any of
the Contributor Plans. Contributor has not previously made, is not currently
making, and is not obligated in any way to make, any contributions to any
multiemployer plan within the meaning of the Multi-Employer Pension Plan
Amendments Act of 1980. With respect to each Contributor Plan, either (i)
the value of plan assets (including commitments under insurance contracts) is
at least equal to the value of plan liabilities or (ii) the value of plan
liabilities in excess of plan assets is disclosed on the Balance Sheet, all
as of the Closing Date.
<PAGE>
2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Contributor, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Shareholders and
Contributor's licensed professional employees, and the conduct of the
Business and use of the Assets, have complied with all applicable laws,
rules, regulations and licensing requirements, including, without limitation,
the Federal Environmental Protection Act, the Occupational Safety and Health
Act, the Americans with Disabilities Act and any environmental laws and
medical waste laws, and there exist no violations by Contributor, any
Shareholder or any licensed professional employee of Contributor of any
Federal, state or local law or regulation. Contributor and Shareholders have
not received any notice of a violation of any Federal, state and local laws,
regulations and ordinances relating to the operations of the Business and
Assets and no notice of any pending inspection or violation of any such law,
regulation or ordinance has been received by Contributor.
2.24 THIRD PARTY PAYORS. Contributor, Shareholders and each licensed
professional employee or independent contractor of Contributor has timely
filed all claims or other reports required to be filed with respect to the
purchase of services by third-party payors, and all such claims or reports
are complete and accurate, and has no liability to any payor with respect
thereto. There are no pending appeals, overpayment determinations,
adjustments, challenges, audit, litigation or notices of intent to open
Medicare or Medicaid claim determinations or other reports required to be
filed by Contributor, any Shareholder and each licensed professional employee
of Contributor. Neither Contributor, nor any Shareholder, nor any licensed
professional employee of Contributor has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Contributor, Shareholders and Contributor's licensed professional employees
has not (a) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made
any false statement or representation of a material fact for use in
determining rights to any benefit or payment; (c) failed to disclose
knowledge of the occurrence of any event affecting the initial or continued
right to any benefit or payment on its own behalf or on behalf of another,
with the intent to fraudulently secure such benefit or payment; and (d)
violated any applicable state anti-remuneration or self-referral statutes,
rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Contributor or Shareholders in this Agreement, and no Exhibit or certificate
issued or executed by, or information furnished by, officers or directors of
Contributor or any Shareholder and furnished or to be furnished to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Contributor has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Contributor, or their respective
spouses, children or affiliates, owns directly or indirectly, on an
individual or joint basis, any interest in, has a compensation or other
financial arrangement with, or serves as an officer or director of, any
customer or supplier or competitor of Contributor or any organization that
has
<PAGE>
a material contract or arrangement with Contributor.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Contributor's services which
accounted for more than 10% of revenues of Contributor in the preceding
fiscal year. Contributor has good relations with all such payors and other
material payors of Contributor and none of such payors has notified
Contributor that it intends to discontinue its relationship with Contributor
or to deny any claims submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Contributor and Shareholders
as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Pentegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would
not have a material adverse effect, there are no proceedings pending or, to
the knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has knowledge to the continued operation of its business or the use
of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to
<PAGE>
have been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Contributor or
any Shareholder pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
SECTION 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS.
Contributor and Shareholders, jointly and severally, agree that between
the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Shareholders
shall use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions.
Contributor and Shareholders agree to complete the Exhibits hereto to be
provided by them in form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Contributor and Shareholders shall operate the
Business and use the Assets in the ordinary course. Contributor and
Shareholders shall not enter into any lease, contract, indebtedness,
commitment, purchase or sale or acquire or dispose of any capital asset
relating to the Business or the Assets except in the ordinary course of
business. Contributor and Shareholders shall use their best efforts to
preserve the Business and Assets intact and shall not take any action that
would have an adverse effect on the Business or Assets. Contributor and
Shareholders shall use their best efforts to preserve intact the
relationships with payors, customers, suppliers, patients and others having
significant business relations with Contributor. Contributor and Shareholders
shall collect its receivables and pay its trade payables in the ordinary
course of business. Contributor and Shareholders shall not introduce any new
method of management, operations or accounting.
4.3 ACCESS AND NOTICE. Contributor and Shareholders shall permit
Pentegra and its authorized representatives access to, and make available for
inspection, all of the assets and business of Contributor, the Business and
the Assets, including employees, customers and suppliers and permit Pentegra
and its authorized representatives to inspect and make copies of all
documents, records and information with respect to the business or assets of
Contributor, the Business or the Assets as Pentegra or its representatives
may request. Contributor and Shareholders shall promptly notify Pentegra in
writing of (a) any notice or communication relating to a default or event
that, with notice or lapse of time or both, could become a default, under any
<PAGE>
contract, commitment or obligation to which Contributor is a party or
relating to the Business or the Assets, and (b) any adverse change in
Contributor's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor
and Shareholders shall use their best efforts to secure all necessary
approvals and consents of third parties to the consummation of the
transactions contemplated hereby, including consents described on EXHIBIT
2.4. Contributor and Shareholders shall use their best efforts to obtain all
licenses, permits, approvals or other authorizations required under any law,
rule, regulation, or otherwise to provide the services of Contributor
contemplated by the Service Agreement and to conduct the intended business of
Contributor and operate the Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance
with the provisions hereof, Contributor and Shareholders shall not, and shall
use its best efforts to cause Contributor's employees, agents and
representatives not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer, including without limitation, any proposal or offer to any
Shareholder, with respect to a merger, acquisition, consolidation or similar
transaction involving, or the purchase of all or any significant portion of
the assets or any equity securities of Contributor or engage in any
negotiations concerning, or provide any confidential information or data to,
or have any discussions with, any person relating to such proposal or offer,
and Contributor and Shareholders will immediately cease any such activities,
discussions or negotiations heretofore conducted with respect to any of the
foregoing. Contributor and Shareholders shall immediately notify Pentegra if
any such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby covenants
and agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Contributor or any entity might have any liability
whatsoever arising from any insurance, pension plan, employment tax or
similar liability of Contributor to any employee or other person or entity
(including, without limitation, any Contributor Plan and any liability under
employment contracts with Contributor) allocable to services performed prior
to the Closing Date. Contributor and Shareholders acknowledge that the
purpose and intent of this covenant is to assure that Pentegra shall have no
unfunded liability whatsoever at any time after the Closing Date with respect
to any of Contributor's employees or similar persons or entities, including,
without limitation, any Contributor Plan for the period prior to the Closing
Date.
4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash
compensation of any Shareholder (other than in the ordinary course of
business) or other employee or an independent contractor of Contributor,
adopt, amend or terminate any compensation plan, employment agreement,
independent contractor agreement, employee policies and procedures or
employee benefit plan, take any action that could deplete the assets of any
employee benefit, or fail to pay any premium or contribution due or file any
report with respect to any employee benefit plan, or take any other actions
with respect to its employees or employee matters which might have an adverse
effect upon Contributor, its business, assets or prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Contributor, nor will any repurchase
of any of Contributor's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Shareholders
shall use their best efforts to take, or cause to be taken, all actions
necessary to effect the acquisition contemplated hereby under applicable law.
<PAGE>
4.10 ACCOUNTING AND TAX MATTERS. Contributor and Shareholders will
not change in any material respect the tax or financial accounting methods or
practices followed by Contributor (including any material change in any
assumption underlying, or any method of calculating, any bad debt,
contingency or other reserve), except as may be required by law or generally
accepted accounting principles. Contributor and Shareholders will duly,
accurately and timely (without regard to any extensions of time) file all
returns, information statements and other documents relating to taxes of
Contributor required to be filed by it, and pay all taxes required to be paid
by it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Contributor hereby waive any compliance with the applicable state Bulk
Transfers Act, if any. Contributor and Shareholders covenant and agree that
all of the creditors with respect to the Business and the Assets will be paid
in full by Contributor prior to the Closing Date, except to extent that any
liability to such creditors is assumed by Pentegra pursuant to this
Agreement. If required by Pentegra, Contributor and Shareholders shall
furnish Pentegra with proof of payment of all creditors with respect to the
Business and the Assets. Notwithstanding the foregoing, Contributor and
Shareholders may dispute the validity or amount of any such creditor's claim
without being deemed to be in violation of this SECTION 4.11, provided that
such dispute is in good faith and does not unreasonably delay the resolution
of the claim and provided, further that Contributor and Shareholders agree to
indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Contributor leases any of its premises from any
Shareholder or other affiliate of Contributor or any shareholder of
Contributor, Pentegra shall have entered into a building lease (the "Building
Lease") with the owner of such premises on terms and conditions satisfactory
to Pentegra, the terms and conditions of which shall include, without
limitation, (i) a five year initial term plus three five-year renewal
options, (ii) a lease rate equal to the fair market value lease rate, as
agreed to by Pentegra, and (iii) such other provisions to be acceptable to
Pentegra.
4.13 HIRING OF EMPLOYEES. Contributor and Shareholders shall
cooperate with all requests made by Pentegra for the purpose of allowing
Pentegra to hire those non-dental employees of Contributor designated by
Pentegra, such employment to be effective as of the Closing Date.
Notwithstanding the above, Contributor and Shareholders shall remain liable
under any Contributor Plans for any claims incurred by any employees or their
spouses or dependents, and for all compensation, bonuses, benefits and other
such items and other liabilities related to Contributor's employees incurred
by Contributor prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges
that all employees of Contributor hired by Pentegra pursuant to SECTION 4.13
above, shall be treated as "leased employees" (as defined in Code Section
414(n)) of Contributor and shall be treated as Clinic employees for purposes
of eligibility and participation in Contributor Plans.
4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates
to be named as an additional insured on its liability insurance programs,
effective as of the Closing Date.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its
best efforts to cause the consummation of the transactions contemplated
hereby in accordance with their terms and provisions. Pentegra agrees to
complete the Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra
shall use its best efforts
<PAGE>
to secure all necessary approvals and consents of third parties to the
consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS.
Pentegra, Shareholders and Contributor agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Contributor and
Shareholders shall cooperate to promptly prepare and file with the Securities
Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other
appropriate Form) to be filed by Pentegra in connection with its Initial
Public Offering (including the prospectus constituting a part thereof, the
"Registration Statement"). Pentegra shall obtain all necessary state
securities laws or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement and the Contributor and
Shareholders shall furnish all information concerning Contributor and
Shareholders as may be reasonable requested in connection with any such
action.
Contributor and Shareholder represent and warrant that none of the
information or documents supplied or to be supplied by it specifically for
inclusion in the Registration Statement, by exhibit or otherwise, will, at
the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act of 1933, 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, in
light of the circumstances under which they were made, not misleading.
Contributor and Shareholders shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.
Contributor and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by
Pentegra in connection with the preparation of the Registration Statement and
each amendment or supplement thereto, or any other statement, filing, notice
or application made by or on behalf of each such party or any of its
subsidiaries to any governmental entity in connection with the transactions
contemplated by the Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Contributor and Shareholders contained herein shall have been
true and correct in all respects when initially made and shall be true and
correct in all respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Contributor and Shareholders shall
have performed and complied with all covenants and conditions required by
this Agreement to be performed and complied with by Contributor and
Shareholders prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Contributor shall have occurred since the
<PAGE>
Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Contributor, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and
Pentegra shall have executed and delivered a Service Agreement (the "Service
Agreement"), in substantially the form attached hereto as EXHIBIT 7.7,
pursuant to which Pentegra will provide management services to the
Contributor. Each Shareholder shall have executed and delivered a Guaranty
Agreement in substantially the form attached as EXHIBIT 4.10 of the Service
Agreement pursuant to which Shareholder shall, among other things, guaranty
the obligations of Contributor under the Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated,
and caused each shareholder of Contributor that has an existing employment
agreement with Contributor to have terminated his or her employment agreement
with Contributor and shall have executed an employment agreement ("Employment
Agreement") with Contributor in form and substance attached hereto as EXHIBIT
7.8 and otherwise satisfactory to Contributor and Pentegra.
7.9 CONSENTS AND APPROVALS. Contributor and Shareholders shall
have obtained all necessary government and other third-party approvals and
consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all
documents, duly executed in form satisfactory to Pentegra and its counsel,
referred to in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness,
receivables or payables between Contributor and its shareholders or
affiliates and Contributor shall not have any liabilities, including
indebtedness, guaranties and capital leases, that are not set forth on
EXHIBIT 2.19.
7.12 INSURANCE. Contributor and Shareholders shall have named
Pentegra as an additional insured on their liability insurance program in
accordance with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no
material change in the working capital of Contributor since the Balance Sheet
Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Contributor and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
<PAGE>
8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Pentegra contained herein shall have been true and correct in
all respects when initially made and shall be true and correct in all
respects as of the Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Contributor shall have received all
documents, duly executed in form satisfactory to Contributor and its counsel,
referred to in SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. Within five
business days after requested by Pentegra, Contributor and Shareholders shall
deliver to Pentegra the following, all of which shall be in a form
satisfactory to counsel to Pentegra and shall be held by Jackson & Walker,
L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an
escrow agreement or letter agreement in form and substance mutually
acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a copy of the resolutions of the Board of Directors of
Contributor authorizing the execution, delivery and performance of this
Agreement, the Service Agreement, the Employment Agreements and all related
documents and agreements each certified by the Secretary as being true and
correct copies of the original thereof;
(d) a bill of sale conveying the Assets to Pentegra;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(f) certificates of the Shareholders and a duly authorized officer
of Contributor dated as of the
<PAGE>
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Contributor and Shareholder contained herein; (ii) as to the
performance of and compliance by Contributor and Shareholder with all
covenants contained herein; and (iii) certifying that all conditions
precedent of Contributor and Shareholders to the Closing have been satisfied;
(g) a certificate of the Secretary of Contributor certifying as to
the incumbency of the directors and officers of Contributor and as to the
signatures of such directors and officers who have executed documents
delivered at the Closing on behalf of Contributor;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Contributor and any state of
required foreign qualification of Contributor establishing that Contributor
is in existence and is in good standing to transact business in its state of
incorporation;
(i) an opinion of counsel to Contributor and Shareholder opining as
to the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Contributor, the enforceability of this Agreement and the other agreements
and documents to be executed in connection herewith, and other matters
reasonably requested by Pentegra;
(j) non-foreign affidavits executed by Contributor;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Contributor, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Contributor and Shareholder, the following, all of which
shall be in a form satisfactory to counsel to Contributor and Shareholders
and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in
escrow pending Closing, pursuant to an escrow agreement or letter agreement
in form and substance mutually acceptable to the parties hereto:
(a) the Acquisition Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
<PAGE>
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Contributor;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Contributor;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Contributor to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this
Agreement or in any Exhibit attached hereto, any agreement executed pursuant
hereto, and any certificate executed and delivered by any party pursuant to
the terms of this Agreement, shall constitute representations and warranties
of Contributor and Shareholders, jointly and severally, or of Pentegra, as
the case may be. All such representations and warranties, and all
representations and warranties expressly labeled as such in this Agreement
shall survive the date of this Agreement and the Closing Date for a period of
five (5) years following the Closing Date, except that (i) the
representations and warranties with respect to environmental and medical
waste laws and health care laws and matters shall survive for a period of
fifteen (15) years and tax representations shall survive until one year after
the expiration of the applicable statute of limitations. Each party covenants
with the other parties not to make any claim with respect to such
representations and warranties, against any party after the date on which
such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof,
unless such party has timely given the notice required in SECTION 10.2, 10.3
or 10.4 hereof, as the case may be. Each party hereby releases, acquits and
discharges the other party from any and all claims and demands, actions and
causes of action, damages, costs, expenses and rights of setoff with respect
to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable,
are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS
SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"),
SHALL INDEMNIFY AND HOLD CONTRIBUTOR AND ITS SHAREHOLDERS, AGENTS AND
EMPLOYEES (EACH OF THE FOREGOING, INCLUDING CONTRIBUTOR AND SHAREHOLDERS, FOR
PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN
"INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES,
LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING,
BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH
APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY,
AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO
<PAGE>
BE FURNISHED BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. CONTRIBUTOR AND
SHAREHOLDERS (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT
APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL
INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS,
SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND
EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR
WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND
EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED
BY INDEMNITOR HEREUNDER, AND
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS WHETHER ON OR
AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY CONTRIBUTOR OR ITS SHAREHOLDERS OR THEIR
CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE
OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR
OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE CONTRIBUTOR OR
SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD
<PAGE>
PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF CONTRIBUTOR OR ANY SHAREHOLDER OR ANY OTHER PERSON OR
ENTITY RELATED TO OR AFFILIATED WITH THE CONTRIBUTOR OR SHAREHOLDER ARISING
FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF CONTRIBUTOR OR THE SHAREHOLDERS FOR COSTS AND
EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN
CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN
CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS
SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE CONTRIBUTOR OR
ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS,
THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
CONTRIBUTOR OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO
MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after
Indemnified Person receives written notice of the commencement of any action
or other proceeding in respect of which indemnification or reimbursement may
be sought hereunder, or within such lesser time as may be provided by law for
the defense of such action or proceeding, such Indemnified Person shall
notify Indemnitor thereof. If any such action or other proceeding shall be
brought against any Indemnified Person, Indemnitor shall, upon written notice
given within a reasonable time following receipt by Indemnitor of such notice
from Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall
<PAGE>
not, without the prior written consent of any Indemnified Person, settle or
compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding to which such Indemnified Person is a
party unless such settlement, compromise or consent includes an unconditional
release of such Indemnified Person from all liability arising or potentially
arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Contributor or any Shareholder
giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof,
Pentegra shall be entitled to offset the amount of damages incurred by it as
a result of such breach of warranty, representation, covenant or agreement
against any amounts payable by Pentegra, including the amounts payable under
the Service Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of
Contributor or Shareholder contained in this Agreement or in any certificate
or other document executed and delivered by Contributor or any Shareholder
pursuant to this Agreement is or becomes untrue or breached in any material
respect or if Contributor or any Shareholder fails to comply in any material
respect with any covenant or agreement contained herein, and any such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;
(c) at any time by Contributor or any Shareholder if any representation
or warranty of Pentegra contained in this Agreement or in any certificate or
other document executed and delivered by Pentegra pursuant to this Agreement
is or becomes untrue or breached in any material respect or if Pentegra fails
to comply in any material respect with any covenant or agreement contained
herein and such misrepresentation, noncompliance or breach is not cured,
waived or eliminated within twenty (20) days after receipt of written notice
thereof;
(d) by Pentegra, Shareholders or Contributor if the transaction
contemplated hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Contributor, that such termination
is desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the
Closing Date, Contributor shall not voluntarily (a) sell, assign, exchange,
transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i)
any shares of Pentegra Common Stock received by such party hereunder, (ii)
any interest (including without limitation, an option to buy or sell) in any
shares of Pentegra Common Stock, in whole or in part, and no such attempted
transfer shall be treated as effective for any purpose or (b) engage in any
transaction, whether or not with respect to any shares of Pentegra Common
Stock or any interest therein, the intent or effect of which is to reduce the
risk of owning shares of Pentegra Common Stock. The certificates evidencing
the Pentegra Common Stock delivered to Contributor pursuant to the terms
hereof will bear a legend substantially in the form set forth below and
containing such other information as Pentegra may deem necessary or
appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged,
<PAGE>
transferred, encumbered, pledged, distributed, appointed or otherwise
disposed of, and the issuer shall not be required to give effect to any
attempted voluntary sale, assignment, exchange, transfer, encumbrance,
pledge, distribution, appointment or other disposition prior to _________
[date that is one year from the Closing Date]. Upon the written request of
the holder of this certificate, the issuer agrees to remove this restrictive
legend (and any stop order placed with the transfer agent) after the date
specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Shareholders
acknowledge that the shares of Pentegra Common Stock to be delivered to
Contributor pursuant to this Agreement have not been and will not be
registered under the Securities Act of 1933 and may not be resold without
compliance with the Securities Act of 1933. The Pentegra Common Stock to be
acquired by Contributor pursuant to this Agreement is being acquired solely
for its own account, for investment purposes only and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution. Contributor covenants, warrants and represents that
none of the shares of Pentegra Common Stock issued to it will be offered,
sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
except after full compliance with all of the applicable provisions of the
Securities Act, as amended, and the rules and regulations of the Securities
Exchange Commission and applicable state securities laws and regulations.
All certificates evidencing shares of Pentegra Common Stock shall bear the
following legend in addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock
shall bear any legend required by the securities or blue sky laws of any
state where Contributor resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Shareholders
are able to bear the economic risk of an investment in Pentegra Common Stock
acquired pursuant to this Agreement and can afford to sustain a total loss of
such investment and have such knowledge and experience in financial and
business matters that they are capable of evaluating the merits and risks of
the proposed investment and therefore have the capacity to protect their own
interests in connection with the acquisition of the Pentegra Common Stock.
Contributor, Shareholders and their representatives have had an adequate
opportunity to ask questions and receive answers from the officers of
Pentegra concerning any and all matters relating to the background and
experience of the officers and directors of Pentegra, the plans for the
operations of the business of Pentegra, and any plans for additional
acquisitions and the like. Contributor, Shareholders and their
representatives have asked any and all questions in the nature described in
the preceding sentence and all questions have been answered to their
satisfaction. Contributor and Shareholders are "accredited investors" as
defined in Regulation D of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and
Shareholders recognize and acknowledge that they had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Contributor and Shareholders agree that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally
through no fault of Contributor or Shareholders, (ii) disclosure is required
by law or the order of any governmental authority under color of law,
provided, that prior to disclosing any information pursuant to this clause
(ii), Contributor and Shareholders shall, if possible, give prior written
notice thereof to the other parties hereto, and provide such other parties
hereto with the opportunity to contest such disclosure, (iii) Contributor and
Shareholders reasonably believe that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party, or
(iv)
<PAGE>
Contributor and Shareholders are the sole and exclusive owner of such
confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Contributor or Shareholders of the provisions of this SECTION 13, Pentegra
shall be entitled to an injunction restraining Contributor and Shareholders
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Pentegra from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. The obligations of the parties under this SECTION 13 shall
survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions
contemplated by this Agreement, together with the transactions contemplated
by the Other Agreement and the Initial Public Offering, will qualify as an
exchange meeting the requirements of Section 351 of the Code. The tax
returns (and schedules thereto) of Shareholders, Contributor and Pentegra
shall be filed in a manner consistent with such intention and Contributor and
Pentegra shall each provide the other with such tax information, reports,
returns or schedules as may be reasonably required to assist the other in so
reporting the transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Contributor or Shareholders:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the
<PAGE>
overnight courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any
further acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of
the parties to this Agreement shall pay all of the costs and expenses
incurred by such party in connection with the transactions contemplated by
this Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Contributor or any Shareholder for
services rendered in connection with negotiating and closing the transactions
contemplated by this Agreement or the documents to be executed in connection
herewith, whether or not such costs or expenses are incurred before or after
the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and
its terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Contributor.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF
CONTRIBUTOR AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS
PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made
for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this
Agreement are integral parts of this Agreement as if fully set forth herein,
and all statements appearing therein shall be deemed disclosed for all
purposes and not only in connection with the specific representation in which
they are explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one and the
same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder
<PAGE>
without the prior written consent of the other parties; provided, however,
that Pentegra may assign its rights and delegate its obligations hereunder to
any entity that is an affiliate of Pentegra. For purposes of this Agreement
an "affiliate" of Pentegra shall include any entity that, through one or more
intermediaries is, controlled, controlled by or under common control with,
Pentegra. Upon any such assignment prior to the Closing, all references
herein to Pentegra (including those to Pentegra Common Stock) shall be deemed
to include references to the assignee and the assignee's common stock.
Notwithstanding any such assignment, Pentegra shall not, absent a written
release from Contributor, be relieved from its obligations to Contributor
under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Contributor, on the other hand, file suit in any court against any
other party to enforce the terms of this Agreement against the other party or
to obtain performance by it hereunder, the prevailing party will be entitled
to recover all reasonable costs, including reasonable attorneys' fees, from
the other party as part of any judgment in such suit. The term "prevailing
party" shall mean the party in whose favor final judgment after appeal (if
any) is rendered with respect to the claims asserted in the Complaint.
"Reasonable attorneys' fees" are those reasonable attorneys' fees actually
incurred in obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at
Closing a pro rata portion of all taxes levied upon the Assets for the
calendar year in which the Closing occurs. Such taxes shall be estimated,
apportioned and pro-rated among Contributor and Pentegra as of the Closing
Date, and the prorated amount due Pentegra shall be credited to the cash
portion of the Purchase Consideration. Upon payment by Pentegra of such
taxes actually assessed and paid on the Assets, Pentegra shall calculate the
apportionment of such taxes and shall pay Contributor or may demand from
Contributor, and Contributor agrees to pay, the amount necessary to correct
the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Contributors or Shareholders (hereinafter referred to as a "Party"), whether
made before or after the institution of any legal proceeding, any dispute
among the parties hereto in any way arising out of, related to, or in
connection with this Agreement (hereinafter a "Dispute"), shall be resolved
by binding arbitration in accordance with the terms of this Section
(hereinafter the "Arbitration Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or foreclosing upon any
personal property in which there has been granted a security interest or lien
by a Party in the Documents. In Disputes involving indebtedness or other
monetary obligations, each Party agrees that the other Party may proceed
against all liable persons, jointly and severally against one or more of
them, without impairing rights against other liable persons. Nor shall a
Party be required to join the principal obligor or any other liable persons
(e.g., sureties or guarantors) in any proceeding against a particular person.
A Party may release or settle with one or more liable persons as the Party
deems fit without releasing or impairing rights to proceed against any
<PAGE>
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoenix,
Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or by
applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
S. Victor Uhrenholdt, D.D.S., P.C.
By: /s/ S. Victor Uhrenholdt, D.D.S.
-----------------------------------------
Its: President
-----------------------------------------
PENTEGRA DENTAL GROUP, INC.
By: /s/ James L. Dunn, Jr.
-----------------------------------------
Its: Senior Vice President
-----------------------------------------
/s/ S. Victor Uhrenholdt, D.D.S.
--------------------------------------------
S. Victor Uhrenholdt, D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
- ------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
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ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
AND
SCOTT VAN ZANDT, D.D.S.
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TABLE OF CONTENTS
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Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . 1
1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . 2
1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . 2
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . 3
2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . 3
2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . 3
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . 3
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . 3
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . 3
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . 6
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . 6
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . 6
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . 6
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . 7
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . 7
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . 7
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . 7
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . 7
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . 8
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . 8
3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . 8
3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . 8
3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . 8
Section 4. COVENANTS OF DENTIST.
4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . 9
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4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . 9
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . 9
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . 9
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . 9
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . 10
4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . 10
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . 10
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . 10
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . 10
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . 10
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . 10
4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . 11
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . 11
4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . 11
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . 11
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . 11
Section 6. COVENANTS OF PENTEGRA AND DENTIST
6.1 FILINGS; OTHER ACTIONS . . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . 12
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . 12
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . 12
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . 12
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . 12
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . 13
Section 8. DENTIST'S CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . 13
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . 13
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . 13
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . 14
Section 9. CLOSING DELIVERIES
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9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . 15
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . 15
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . 16
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . 17
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . 18
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . 19
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . 19
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . 20
14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . 20
14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . 20
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . 21
14.12 NO RULE OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . 21
14.13 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . 21
14.14 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.15 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . 21
14.16 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.17 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . 23
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ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as
of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware
corporation ("Pentegra") and Scott Van Zandt, D.D.S. ("Dentist").
WITNESSETH:
WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires
to receive from Dentist, certain assets of Dentist;
WHEREAS, Pentegra or its affiliated designee has entered into or intends to
enter into Agreements and Plans of Reorganization, Asset Contribution Agreements
and other acquisition agreements (collectively, the "Other Agreements") with
such persons or entities or the stockholders of such entities listed on EXHIBIT
A (together with Dentist, the "Target Companies");
WHEREAS, it is intended for Federal income tax purposes that the transfers
contemplated by this Agreement, the Other Agreements and Pentegra's initial
public offering ("Initial Public Offering") of shares of its common stock, par
value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange
within the meaning of Section 351 of the Internal Revenue Code of 1986, as
amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE CONTRIBUTION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock
is consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".
1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions
contained herein, on the Closing Date, Dentist shall convey, transfer, deliver
and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all
of Dentist's right, title and interest in and to those certain assets described
on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively
"Assets"), free and clear of all obligations, security interests, claims, liens
and encumbrances, except as specifically assumed, or taken subject to, by
Pentegra pursuant to SECTION 1.3(b) hereof.
1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and
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contributed hereunder, and Dentist shall retain all of its right, title and
interest in and to, the assets not specifically transferred hereunder,
including without limitation, the assets described on EXHIBIT 1.2 (the
"Excluded Assets").
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Dentist contained
herein, Pentegra shall, on the Closing Date:
(a) Cause to be transferred to Dentist the consideration specified in
ANNEX I attached hereto (the "Acquisition Consideration"); and.
(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b)
attached hereto to the extent that such obligations, commitments, liabilities
and indebtedness are current and not otherwise in default. (the "Assumed
Liabilities"). Notwithstanding any contrary provision contained herein,
Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i)
any liability, commitment or obligation or trade payable or indebtedness not
specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on
EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default
under such contracts, leases, commitments or obligations which occurred on or
before the Closing Date; (iii) any liability for any employee benefits
payable to employees of Dentist, including, but not limited to, liabilities
arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any
liability based upon or arising out of a violation of any antitrust or
similar restraint-of-trade laws by Dentist, including, without limiting the
generality of the foregoing, any such antitrust liability which may arise in
connection with agreements, contracts, commitments or orders for the sale of
goods or provision of services by Dentist reflected on the books of Dentist
at or prior to the Closing Date; (v) any liability based upon or arising out
of any tortious or wrongful actions of Dentist, any licensed professional
employee or independent contractor of Dentist, (vi) any liability for the
payment of any taxes of Dentist, including without limitation, sales, use and
other transfer taxes and income taxes arising from or by reason of the
transactions contemplated by this Agreement; (vii) any indebtedness secured
by deeds of trust or mortgages on real property; nor (viii) any liability
incurred or to be incurred pursuant to any malpractice or other suits or
actions pending against Dentist.
1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement, the
Dentist shall execute and deliver all such deeds, bills of sale, assignments and
assurances and take and do all such other actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right, title and interest
in, to and under the Assets in Pentegra or otherwise to carry out this
Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
Dentist hereby represents and warrants to Pentegra as follows:
2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the
State of Texas. Dentist does not have any assets, employees or offices in any
state other than the state set forth in the first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and
perform this
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Agreement and the other agreements to be executed and delivered in connection
herewith. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing
Date, duly executed and delivered by Dentist and constitute or will
constitute the legal, valid and binding obligations of Dentist in accordance
with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies. The execution and delivery of
this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and,
subject to the receipt of consents described on EXHIBIT 2.4, the consummation
of the actions contemplated hereby will not, result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Dentist is a party or
by which Dentist is bound, or violate any material restrictions of any kind
to which Dentist is subject, or result in any lien or encumbrance on any of
Dentist's assets or the Assets.
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All material
building or other permits, certificates of occupancy, concessions, grants,
franchises, licenses, certificates of need and other governmental authorizations
and approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect and
are described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Dentist, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses or
permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Dentist.
2.5 [INTENTIONALLY DELETED].
2.6 [INTENTIONALLY DELETED].
2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any related
unaudited statements of income, retained earnings, schedule of accounts
receivable, accounts payable and accrued liabilities, and cash flows for the
twelve months then ended (collectively, with the related notes thereto, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and results of operations of Dentist as of the dates and for the
periods indicated and reflect all fixed and contingent liabilities of Dentist.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Dentist leases, as lessor or lessee, real or personal property
used in operating the Business, related to the Assets or otherwise. All such
leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their
respective terms, and there is not under any such lease any existing default by
Dentist, as lessor or lessee, or any condition or event of which Dentist has
knowledge which with notice or lapse of time, or both, would constitute a
default, in respect of which Dentist has not taken adequate steps to cure such
default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Dentist has no knowledge of any
latent defects therein.
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2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances set
forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to the Closing Date and evidence of
such releases of liens and claims shall be provided to Pentegra on the Closing
Date and the Assets shall not be used to satisfy such liens, claims or
encumbrances. Pentegra acknowledges that it has acquired the assets "where and
as is" relying solely upon Pentegra's own examination.
2.11 INVENTORIES. All of the Assets constituting inventory are owned or
used by Dentist, are in good, current, standard and merchantable condition and
are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Dentist has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Dentist, including the names of any entities from whom Dentist previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Dentist in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Dentist has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on
EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this
Agreement of: (a) the most recent payroll report of Dentist, showing all current
employees of Dentist and their current levels of compensation, (b) promised
increases in compensation of employees of Dentist that have not yet been
effected, (c) oral or written employment agreements, consulting agreements or
independent contractor agreements (and all amendments thereto) to which Dentist
is a party, copies of which have been delivered to Pentegra, and (d) all
employee manuals, materials, policies, procedures and work-related rules, copies
of which have been delivered to Pentegra. Dentist is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Dentist has not engaged in any unfair labor practice.
There are no unfair labor practices charges or complaints pending or threatened
against Dentist, and Dentist has never been a party to any agreement with any
union, labor organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Except as set forth on Exhibit 2.16, neither
Dentist nor the Business nor any of the Assets is subject to any pending, nor
does Dentist have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Dentist, the Business, the Assets or the transactions contemplated by
this Agreement, and, to the knowledge of Dentist, no basis for any such action
exists, nor is there any legal impediment of which Dentist has knowledge to the
continued operation of its business or the use of the Assets in the ordinary
course, subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts, obligations
and commitments of Dentist ("Contracts"), entered into
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in connection with and related to the Assets or the Business, all of which
are listed or incorporated by reference on EXHIBIT 2.8 (in the case of
leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15
(in the case of Contracts other than leases) attached hereto. Except as
otherwise indicated on such Exhibits, all of such Contracts are valid,
binding and enforceable in accordance with their terms and are in full force
and effect, and no defenses, offsets or counterclaims have been asserted or
may be made by any party thereto. Except as indicated on such Exhibits,
there is not under any such Contract any existing default by Dentist, or any
condition or event of which Dentist has knowledge which with notice or lapse
of time, or both, would constitute a default. Dentist has no knowledge of
any default by any other party to such Contracts. Dentist has not received
notice of the intention of any party to any Contract to cancel or terminate
any Contract and have no reason to believe that any amendment or change to
any Contract is contemplated by any party thereto. Other than those
contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13
and EXHIBIT 2.15, Dentist is not a party to any material written or oral
agreement contract, lease or arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product or
service;
(h) Loan agreement or other contract for money borrowed or lent or to
be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of the
Dentist, oral or written, that provide for prepayments or deferred installment
payments; or
(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Dentist on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) or entered into any contract, lease, license or
commitment, except in connection with the performance of this Agreement, other
than in the course of business;
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material
<PAGE>
obligation or liability (absolute, accrued, contingent or otherwise) other
than (i) liabilities shown or reflected on the Balance Sheet, (ii)
liabilities incurred since the Balance Sheet Date in the ordinary course of
business;
(c) Made any payments to or loaned any money to any person or entity
other than in the ordinary course of business;
(d) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(e) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have been
required due to income or operations of Dentist since the Balance Sheet Date;
(f) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(g) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(h) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants or
agents, or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of any officer, employee, consultant or agent;
(i) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00);
(j) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(k) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties, assets
or business or the Business or the Assets, or experienced any other material
adverse change in its financial condition, assets, prospects, liabilities or
business; or
(l) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports
and other statements) required to have been filed by it or have been properly
extended, and has paid all taxes (including any interest, penalty or additions
thereto) required to have been paid by it. All such tax returns are complete
and accurate in all respects and properly reflect the relevant taxes for the
periods covered thereby. Dentist has not received any notice that any tax
deficiency or delinquency has been or may be asserted against Dentist. There
are no audits relating to taxes of Dentist pending or in process or, to the
knowledge of Dentist, threatened. Dentist is not currently the beneficiary of
any waiver of any statute of limitations in respect of taxes nor of any
extension of time within which to file any tax return or to pay any tax
assessment or deficiency. There are no liens or encumbrances relating to taxes
on or threatened against any of the assets of Dentist. Dentist has withheld and
paid all taxes required by law to have been withheld and paid by it. Neither
Dentist nor any predecessor of Dentist is or has been a party to any tax
allocation or
<PAGE>
sharing agreement or a member of an affiliated group of corporations filing a
consolidated Federal income tax return. Dentist has delivered to Pentegra
correct and complete copies of Dentist's three most recently filed annual
state, local and Federal income tax returns, together with all examination
reports and statements of deficiencies assessed against or agreed to by
Dentist during the three calendar year period preceding the date of this
Agreement. Dentist has neither made any payments, is obligated to make any
payments, or is a party to any agreement that under any circumstance could
obligate it to make any payments that will not be deductible under Code
section 280G.
(b) Dentist does not intend to dispose of any of the shares of Pentegra
Common Stock to be received hereunder and is not a party to any plan,
arrangement or agreement for the disposition of such shares. Nothing contained
herein shall prohibit Dentist from selling such shares of Pentegra Common Stock
after the designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated by
this Agreement which may be now or hereafter asserted against Pentegra, Dentist
resulting from any action taken by Dentist or their respective agents or
employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against
on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and
has not incurred since that date and will not have incurred as of the Closing
Date, any material liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, other than
those incurred in the ordinary course of business or as set forth on EXHIBIT
2.16. Dentist does not know, or have reasonable grounds to know, of any basis
for the assertion against Dentist as of the Balance Sheet Date, of any claim or
liability of any nature in any amount not fully reflected or reserved against on
the Balance Sheet, or of any claim or liability of any nature arising since that
date other than those incurred in the ordinary course of business or
contemplated by this Agreement. All indebtedness of Dentist (including without
limitation, indebtedness for borrowed money, guaranties and capital lease
obligations) is described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist
carries property, liability, malpractice, workers' compensation and such other
types of insurance as is customary in the industry. Valid and enforceable
policies in such amounts are outstanding and duly in force and will remain duly
in force through the Closing Date. All such policies are described in EXHIBIT
2.20 attached hereto and true and correct copies have been delivered to
Pentegra. Dentist has not received notice or other communication from the
issuer of any such insurance policy cancelling or amending such policy or
threatening to do so. Neither Dentist nor any licensed professional employee of
Dentist has any outstanding claims, settlements or premiums owed against any
insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached
hereto, Dentist has neither established, nor maintains, nor is obligated to make
contributions to or under or otherwise participate in, (a) any bonus or other
type of compensation or employment plan, program, agreement, policy, commitment,
contract or arrangement (whether or not set forth in a written document); (b)
any pension, profit-sharing, retirement or other plan, program or arrangement;
or (c) any other employee benefit plan, fund or program, including, but not
limited to, those described in SECTION 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT
2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been
operated and administered in all material respects in accordance with all
applicable laws, rules and regulations, including without limitation, ERISA, the
Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of
1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination
in Employment Act of 1967, as amended, and the related rules and regulations
adopted by those Federal agencies responsible for the administration of such
laws. To the best of the Dentist's knowledge, no act or failure to
<PAGE>
act by Dentist has resulted in a "prohibited transaction" (as defined in
ERISA) with respect to the Dentist Plans. No "reportable event" (as defined
in ERISA) has occurred with respect to any of the Dentist Plans. Dentist has
not previously made, is not currently making, and is not obligated in any way
to make, any contributions to any multiemployer plan within the meaning of
the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each
Dentist Plan, either (i) the value of plan assets (including commitments
under insurance contracts) is at least equal to the value of plan liabilities
or (ii) the value of plan liabilities in excess of plan assets is disclosed
on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing
Date, a party to any agreement or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree, rule or
regulation that materially and adversely affects the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Dentist,
the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed
professional employees, and the conduct of the Business and use of the
Assets, have complied with all applicable laws, rules, regulations and
licensing requirements, including, without limitation, the Federal
Environmental Protection Act, the Occupational Safety and Health Act, the
Americans with Disabilities Act and any environmental laws and medical waste
laws, and there exist no violations by Dentist or any licensed professional
employee of Dentist of any Federal, state or local law or regulation.
Dentist has not received any notice of a violation of any Federal, state and
local laws, regulations and ordinances relating to the operations of the
Business and Assets and no notice of any pending inspection or violation of
any such law, regulation or ordinance has been received by Dentist.
2.24 THIRD PARTY PAYORS. Dentist and each licensed professional
employee or independent contractor of Dentist has timely filed all claims or
other reports required to be filed with respect to the purchase of services
by third-party payors, and all such claims or reports are complete and
accurate, and has no liability to any payor with respect thereto. There are
no pending appeals, overpayment determinations, adjustments, challenges,
audit, litigation or notices of intent to open Medicare or Medicaid claim
determinations or other reports required to be filed by Dentist and each
licensed professional employee of Dentist. Neither Dentist nor any licensed
professional employee of Dentist has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Dentist and Dentist's licensed professional employees have not (a) knowingly
and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist
in this Agreement, and no Exhibit or certificate issued or executed by, or
information furnished by Dentist or to be furnished by Dentist to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Dentist has with any bank or other
financial institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
<PAGE>
deposit box, etc.) and the person or persons authorized in respect thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or
employee (or their respective spouses, children or affiliates) owns directly or
indirectly, on an individual or joint basis, any interest in, has a compensation
or other financial arrangement with, or serves as an officer or director of, any
customer or supplier or competitor of Dentist or any organization that has a
material contract or arrangement with Dentist.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of
the names and addresses of each payor of Dentist's services which accounted for
more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has
good relations with all such payors and other material payors of Dentist and
none of such payors has notified Dentist that it intends to discontinue its
relationship with Dentist or to deny any claims submitted to such payor for
payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Dentist as follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions required
by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize
the execution, delivery and performance of this Agreement and such related
documents. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing Date,
duly executed and delivered by Pentegra and constitute or will constitute the
legal, valid and binding obligations of Pentegra, enforceable against Pentegra
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and delivery
of this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and, the
consummation of the actions contemplated hereby will not, violate any provision
of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or decree
to which Pentegra is a party or by which Pentegra is bound, or violate any
material restrictions of any kind to which Pentegra is subject, or result in any
lien or encumbrance on any of Pentegra's assets. Other than as have been
obtained or as would not have a material adverse effect, there are no consents
of any person or entity required for the transaction contemplated hereby on
behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Pentegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would not
have a material adverse effect, there are no proceedings pending or, to the
knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses or
permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened,
<PAGE>
litigation, governmental investigation, condemnation or other proceeding
against or relating to or affecting Pentegra, its business, assets or the
transactions contemplated by this Agreement, and, to the knowledge of
Pentegra, no basis for any such action exists, nor is there any legal
impediment of which Pentegra has knowledge to the continued operation of its
business or the use of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports and
other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it, other than as would not have a material adverse effect. Pentegra
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Pentegra. There are no audits relating to taxes of
Pentegra pending or in process or, to the knowledge of Pentegra, threatened.
Pentegra is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra
in this Agreement, and no Exhibit or certificate issued by officers or directors
of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements or facts contained therein not
misleading.
SECTION 4. COVENANTS OF DENTIST.
Dentist agrees that between the date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and conditions. Dentist agrees to complete the
Exhibits hereto to be provided by him in form and substance satisfactory to both
Dentist and Pentegra.
4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the
Assets in the ordinary course. Dentist shall not enter into any lease,
contract, indebtedness, commitment, purchase or sale or acquire or dispose of
any capital asset relating to the Business or the Assets except in the ordinary
course of business. Dentist shall use their best efforts to preserve the
Business and Assets intact and shall not take any action that would have an
adverse effect on the Business or Assets. Dentist shall use their best efforts
to preserve intact the relationships with payors, customers, suppliers, patients
and others having significant business relations with Dentist. Dentist shall
collect its receivables and pay its trade payables in the ordinary course of
business. Dentist shall not introduce any new method of management, operations
or accounting.
4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized
representatives access to, and make available for inspection, all of the assets
and business of Dentist, the Business and the Assets, including employees,
customers and suppliers and permit Pentegra and its authorized representatives
to
<PAGE>
inspect and make copies of all documents, records and information with
respect to the business or assets of Dentist, the Business or the Assets as
Pentegra or its representatives may request. Dentist shall promptly notify
Pentegra in writing of (a) any notice or communication relating to a default
or event that, with notice or lapse of time or both, could become a default,
under any contract, commitment or obligation to which Dentist is a party or
relating to the Business or the Assets, and (b) any adverse change in
Dentist's or the Business' financial condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall
use his best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby, including
consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain
all licenses, permits, approvals or other authorizations required under any law,
rule, regulation, or otherwise to provide the services of the Practice
contemplated by the Service Agreement and to conduct the intended business of
the Practice and operate the Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of Closing or the termination of this Agreement in accordance with the
provisions hereof, Dentist shall not, and shall use its best efforts to cause
Dentist's employees, agents and representatives not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making or implementation
of any proposal or offer, including without limitation, any proposal or offer to
the Dentist, with respect to a merger, acquisition, consolidation or similar
transaction involving, or the purchase of all or any significant portion of the
assets or any equity securities of Dentist or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to such proposal or offer, and Dentist
will immediately cease any such activities, discussions or negotiations
heretofore conducted with respect to any of the foregoing. Dentist shall
immediately notify Pentegra if any such inquiries or proposals are received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund completely
for any accrued benefits, where applicable, or vested accrued benefits for which
Dentist or any entity might have any liability whatsoever arising from any
insurance, pension plan, employment tax or similar liability of Dentist to any
employee or other person or entity (including, without limitation, any Dentist
Plan and any liability under employment contracts with Dentist) allocable to
services performed prior to the Closing Date. Dentist acknowledges that the
purpose and intent of this covenant is to assure that Pentegra shall have no
liability whatsoever at any time after the Closing Date with respect to any of
Dentist's employees or similar persons or entities, including, without
limitation, any Dentist Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of the Dentist (other than in the ordinary course of business) or other employee
or an independent contractor of Dentist, adopt, amend or terminate any
compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect upon Dentist, its business, assets or
prospects.
4.8 [INTENTIONALLY OMITTED].
4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best
efforts to take, or cause to be taken, all actions necessary to effect the
acquisition contemplated hereby under applicable law.
4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material
respect the tax or financial accounting methods or practices followed by Dentist
(including any material change in any
<PAGE>
assumption underlying, or any method of calculating, any bad debt,
contingency or other reserve), except as may be required by law or generally
accepted accounting principles. Dentist will duly, accurately and timely
(without regard to any extensions of time) file all returns, information
statements and other documents relating to taxes of Dentist required to be
filed by it, and pay all taxes required to be paid by it, on or before the
Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive
any compliance with the applicable state Bulk Transfers Act, if any. Dentist
covenants and agrees that all of the creditors with respect to the Business and
the Assets will be paid in full by Dentist prior to the Closing Date, except to
extent that any liability to such creditors is assumed by Pentegra pursuant to
this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with
proof of payment of all creditors with respect to the Business and the Assets.
Notwithstanding the foregoing, Dentist may dispute the validity or amount of any
such creditor's claim without being deemed to be in violation of this SECTION
4.11, provided that such dispute is in good faith and does not unreasonably
delay the resolution of the claim and provided, further that Dentist agrees to
indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Dentist leases any of its premises from the Dentist or
other affiliate of Dentist, Pentegra shall have entered into a building lease
(the "Building Lease") with the owner of such premises on terms and conditions
satisfactory to Pentegra, the terms and conditions of which shall include,
without limitation, (i) a five year initial term plus three five-year renewal
options, (ii) a lease rate equal to the fair market value lease rate, as agreed
to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made
by Pentegra for the purpose of allowing Pentegra to hire those non-dental
employees of Dentist employed by the Dentist as of the Closing Date with, such
employment to be effective as of the Closing Date. Notwithstanding the above,
Dentist shall remain liable under any Dentist Plans for any claims incurred by
any employees or their spouses or dependents, and for all compensation, bonuses,
benefits and other such items and other liabilities related to Dentist's
employees incurred by Dentist prior to the Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all
employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be
treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and
shall be treated as Clinic employees for purposes of eligibility and
participation in Dentist Plans.
4.15 INSURANCE. Dentist shall agree to have and shall assist Pentegra and
its affiliates to be named as an additional insured on its liability insurance
programs, effective as of the Closing Date.
4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited
liability company, partnership or other legal entity (the "Practice") for the
purpose of practicing dentistry and entering into the Service Agreement. The
Practice shall be duly organized, in existing and in good standing under the
laws of the State in which the Dentist and the Practice are to practice
dentistry. The Practice shall have all necessary power to own all of its assets
and to carry on its business as such business is now being conducted. The
Dentist shall be the sole member/shareholder/partner of the Practice and own all
such interests free of all security interests, claims, encumbrances and liens.
Each interest in the Practice shall be legally and validly issued and fully paid
and nonassessable. There shall be no outstanding (a) bonds, debentures, notes
or other obligations the holders of which have the right to vote with the
members/partners/shareholders of the Practice on any matter, (b) securities of
the Practice convertible into equity interests in the Practice, or (c)
commitments, options, rights or warrants to issue any such equity interests in
the Practice, to issue securities of the Practice convertible into such equity
interests, or to redeem any securities of the Practice. No interests
<PAGE>
of the Practice shall have been issued or disposed of in violation of the
preemptive rights, rights of first refusal or similar rights of any of the
Practice's members/partners/shareholders. The Practice shall qualify to do
business as a foreign entity in any other state or jurisdiction by reason of
its business, properties or activities in or relating to such other state or
jurisdiction.
4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations
and minutes of the Practice and all amendments thereto of the Practice shall
have been delivered to Pentegra. The minute books of the Practice shall contain
all accurate minutes of the meetings of and consents to actions taken without
meetings of the members\managers/partners/board of directors of the Practice
since its formation. The books of account of the Practice shall have been kept
accurately in the ordinary course of business and the revenues, expenses, assets
and liabilities of the Practice shall have been properly recorded in such books.
4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the
power to execute, deliver and perform its obligations under all agreements and
other documents to be executed and delivered by it pursuant to this Agreement,
including without limitation, the Service Agreement and each Employment
Agreement to be executed and delivered on the Closing Date, and has taken all
action required by law, its Organization/Partnership Agreement/Articles of
Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution,
delivery and performance of such documents. The Service Agreement, the
Employment Agreement and the other agreements contemplated hereby shall have
been duly executed and delivered by the Practice on the Closing Date and
constitute or will constitute the legal, valid and binding obligations of the
Practice enforceable against the Practice in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of the Service Agreement, the Employment
Agreements and the other agreements contemplated hereby will not violate any
provision of the organizational documents of the Practice or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or decree
to which the Practice is a party or by which the Practice is bound, or violate
any material restrictions of any kind to which the Practice is subject, or
result in any lien or encumbrance on any of the Practice's assets.
4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.
4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and has filed with the
proper authorities all necessary statements and reports.
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra and Dentist agree to
complete the Exhibits hereto to be provided by both parties.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.
<PAGE>
SECTION 6. COVENANTS OF PENTEGRA AND DENTIST.
Pentegra and Dentist agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate
to promptly prepare and file with the Securities Exchange Commission ("SEC")
the Registration Statement on Form S-1 (or other appropriate Form) to be
filed by Pentegra in connection with its Initial Public Offering (including
the prospectus constituting a part thereof, the "Registration Statement").
Pentegra shall obtain all necessary state securities laws or "Blue Sky"
permits and approvals required to carry out the transactions contemplated by
this Agreement and the Dentist shall furnish all information concerning
Dentist as may be reasonable requested in connection with any such action.
Dentist represents and warrants that none of the information or documents
supplied or to be supplied by it specifically for inclusion in the
Registration Statement, by exhibit or otherwise, will, at the time the
Registration Statement and each amendment or supplement thereto, if any,
becomes effective under the Securities Act of 1933, 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, in light of
the circumstances under which they were made, not misleading. Dentist shall
be entitled to review the Registration Statement and each amendment thereto,
if any, prior to the time each becomes effective under the Securities Act of
1933.
Dentist shall furnish Pentegra will all information concerning itself and
such other matters as may be reasonable requested by Pentegra in connection
with the preparation of the Registration Statement and each amendment or
supplement thereto, or any other statement, filing, notice or application
made by or on behalf of each such party or any of its subsidiaries to any
governmental entity in connection with the transactions contemplated by the
Other Agreements or this Agreement.
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at or
prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Dentist contained herein shall have been true and correct in
all respects when initially made and shall be true and correct in all
respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Dentist prior to the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Dentist shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Dentist, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
<PAGE>
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and
Pentegra shall have executed and delivered a mutually agreeable Service
Agreement (the "Service Agreement"), which may be in the form attached hereto
as EXHIBIT 7.7, and otherwise satisfactory to Dentist and Pentegra, pursuant
to which Pentegra will provide management services to the Practice. Dentist
shall have executed and delivered a mutually agreeable Guaranty Agreement
which may be in the form attached as EXHIBIT 4.10, and otherwise
satisfactory to Dentist and Pentegra, of the Service Agreement pursuant to
which Dentist shall, among other things, guaranty the obligations of the
Practice under the Service Agreement.
7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or
her employment agreement and executed an mutually agreeable employment
agreement ("Employment Agreement") with the Practice which may be in the form
attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Dentist and
Pentegra.
7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all
necessary government and other third-party approvals and consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all
documents, duly executed in form satisfactory to Pentegra and its counsel,
referred to in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness,
receivables or payables between Dentist and its affiliates and Dentist shall
not have any liabilities, including indebtedness, guaranties and capital
leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Dentist shall have named Pentegra as an additional
insured on its liability insurance program in accordance with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no
material change in the working capital of Dentist since the Balance Sheet
Date.
7.14 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 8. DENTIST'S CONDITIONS PRECEDENT.
The obligations of Dentist hereunder are subject to fulfillment at or prior
to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Pentegra contained herein shall have been true and correct in
all respects when initially made and shall be true and correct in all
respects as of the Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior
<PAGE>
to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Dentist shall have received all documents,
duly executed in form satisfactory to Dentist and its counsel, referred to in
SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF DENTIST. On or before the Closing Date, Dentist
shall deliver to Pentegra the following, all of which shall be in a form
satisfactory to counsel to Pentegra and shall be held by Jackson & Walker,
L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an
escrow agreement or letter agreement in form and substance mutually
acceptable to the parties hereto:
(a) an executed original Service Agreement and executed originals
of all documents required by that agreement, including but not limited to the
Guaranty Agreement and security agreement referred to therein;
(b) executed Employment Agreements;
(c) a bill of sale conveying the Assets to Pentegra;
(d) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(e) certificates of Dentist dated as of the Closing Date, (i) as to
the truth and correctness of the representations and warranties of Dentist
contained herein; (ii) as to the performance of and compliance by Dentist
with all covenants contained herein; and (iii) certifying that all conditions
precedent of Dentist to the Closing have been satisfied;
(f) an opinion of counsel to Dentist opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Dentist, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Pentegra;
(g) non-foreign affidavits executed by Dentist;
(h) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
<PAGE>
(i) an executed Registration Rights Agreement between Pentegra and
Dentist, in substantially the form attached hereto as EXHIBIT 9.1(L) (the
"Registration Rights Agreement"); and
(j) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Dentist the following, all of which shall be in a form
satisfactory to counsel to Dentist and shall be held by Jackson & Walker,
L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an
escrow agreement or letter agreement in form and substance mutually
acceptable to the parties hereto:
(a) the Acquisition Consideration;
(b) an executed Service Agreement;
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and
the State of incorporation of Dentist;
(h) an opinion of counsel to Pentegra opining as to the execution
and delivery of this Agreement and the other documents and agreements to be
executed pursuant hereto, the good standing and authority of Pentegra, the
enforceability of this Agreement and the other agreements and documents to be
executed in connection herewith, and other matters reasonably requested by
Dentist;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Dentist to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this
Agreement or in any Exhibit
<PAGE>
attached hereto, any agreement executed pursuant hereto, and any certificate
executed and delivered by any party pursuant to the terms of this Agreement,
shall constitute representations and warranties of Dentist or of Pentegra, as
the case may be. All such representations and warranties, and all
representations and warranties expressly labeled as such in this Agreement
shall survive the date of this Agreement and the Closing Date for a period of
five (5) years following the Closing Date, except that (i) the
representations and warranties with respect to environmental and medical
waste laws and health care laws and matters shall survive for a period of
fifteen (15) years and tax representations shall survive until one year after
the expiration of the applicable statute of limitations. Each party
covenants with the other parties not to make any claim with respect to such
representations and warranties, against any party after the date on which
such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof,
unless such party has timely given the notice required in SECTION 10.2, 10.3
or 10.4 hereof, as the case may be. Each party hereby releases, acquits and
discharges the other party from any and all claims and demands, actions and
causes of action, damages, costs, expenses and rights of setoff with respect
to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable,
are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS
SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"),
SHALL INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE
EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND
AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS,
DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR
RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY,
AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE
FURNISHED BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
(D) ANY LIABILITY OF PENTEGRA FOR COSTS AND EXPENSES (INCLUDING,
WITHOUT LIMITATION, ATTORNEY'S FEES) INCURRED IN CONNECTION WITH THE
NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH.
<PAGE>
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS
SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"),
SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS,
SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND
EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR
WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY,
AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO
BE FURNISHED BY INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S
MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE
ASSETS, AND
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES,
AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON
OR AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS
GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION
ARISING OUT OF OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS
SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,
(E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR
AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING,
WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE
NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR
<PAGE>
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW
OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED
UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO
PENTEGRA OR ITS COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY
PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING
A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT
OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL
FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE
THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after
Indemnified Person receives written notice of the commencement of any action
or other proceeding in respect of which indemnification or reimbursement may
be sought hereunder, or within such lesser time as may be provided by law for
the defense of such action or proceeding, such Indemnified Person shall
notify Indemnitor thereof. If any such action or other proceeding shall be
brought against any Indemnified Person, Indemnitor shall, upon written notice
given within a reasonable time following receipt by Indemnitor of such notice
from Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Dentist giving rise to
indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be
entitled to offset the amount of damages incurred by it as a result of such
breach of warranty, representation, covenant or agreement against any amounts
payable by Pentegra, including the amounts payable under the Service
Agreement.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a)at any time by mutual agreement of all parties;
<PAGE>
(b)at any time by Pentegra if any representation or warranty of Dentist
contained in this Agreement or in any certificate or other document executed
and delivered by Dentist pursuant to this Agreement is or becomes untrue or
breached in any material respect or if Dentist fails to comply in any
material respect with any covenant or agreement contained herein, and any
such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within twenty (20) days after receipt of written notice thereof;
(c)at any time by Dentist if any representation or warranty of Pentegra
contained in this Agreement or in any certificate or other document executed and
delivered by Pentegra pursuant to this Agreement is or becomes untrue or
breached in any material respect or if Pentegra fails to comply in any material
respect with any covenant or agreement contained herein and such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;
(d)by Pentegra or Dentist if the transaction contemplated hereby shall not
have been consummated by December 31, 1997; or
(e)by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Dentist, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the
Closing Date, Dentist shall not voluntarily (a) sell, assign, exchange,
transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i)
any shares of Pentegra Common Stock received as consideration by such party
hereunder, (ii) any interest (including without limitation, an option to buy
or sell) in any shares of Pentegra Common Stock, received by any party
hereunder as consideration, in whole or in part, and no such attempted
transfer shall be treated as effective for any purpose or (b) engage in any
transaction, whether or not with respect to any shares of Pentegra Common
Stock or any interest therein, received by any party hereunder as
consideration, the intent or effect of which is to reduce the risk of owning
shares of Pentegra Common Stock. The certificates evidencing the Pentegra
Common Stock delivered to Dentist pursuant to the terms hereof will bear a
legend substantially in the form set forth below and containing such other
information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that
the shares of Pentegra Common Stock to be delivered to Dentist pursuant to
this Agreement have not been and will not be registered under the Securities
Act of 1933 and may not be resold without compliance with the Securities Act
of 1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this
Agreement is being acquired solely for its own account, for investment
purposes only and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution. Dentist
covenants, warrants and represents that none of the shares of Pentegra Common
Stock issued to it will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after full compliance with all of
the applicable provisions of the Securities Act, as amended, and the rules
and regulations of the
<PAGE>
Securities Exchange Commission and applicable state securities laws and
regulations. All certificates evidencing shares of Pentegra Common Stock
shall bear the following legend in addition to the legend referenced in
SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock
shall bear any legend required by the securities or blue sky laws of any
state where Dentist resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the
economic risk of an investment in Pentegra Common Stock acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and
has such knowledge and experience in financial and business matters that they
are capable of evaluating the merits and risks of the proposed investment and
therefore have the capacity to protect its own interests in connection with
the acquisition of the Pentegra Common Stock. Dentist and its
representatives have had an adequate opportunity to ask questions and receive
answers from the officers of Pentegra concerning any and all matters relating
to the background and experience of the officers and directors of Pentegra,
the plans for the operations of the business of Pentegra, and any plans for
additional acquisitions and the like. Dentist and its representatives have
asked any and all questions in the nature described in the preceding sentence
and all questions have been answered to their satisfaction. Dentist is an
"accredited investor" as defined in Regulation D of the Securities Act of
1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes
and acknowledges that it had in the past, currently have, and in the future
may possibly have, access to certain confidential information of Pentegra
that is a valuable, special and unique asset of Pentegra's businesses.
Dentist agrees that it will not disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or
reason whatsoever, unless (i) such information becomes available to or known
by the public generally through no fault of Dentist, (ii) disclosure is
required by law or the order of any governmental authority under color of
law, provided, that prior to disclosing any information pursuant to this
clause (ii), Dentist shall, if possible, give prior written notice thereof to
the other parties hereto, and provide such other parties hereto with the
opportunity to contest such disclosure, (iii) Dentist reasonably believes
that such disclosure is required in connection with the defense of a lawsuit
against the disclosing party, or (iv) Dentist is the sole and exclusive owner
of such confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Dentist of the provisions of this SECTION 13, Pentegra shall be entitled to
an injunction restraining Dentist from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
Pentegra from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages. The obligations of the
parties under this SECTION 13 shall survive the termination of this Agreement.
Pentegra recognizes and acknowledges that it had in the past, currently
have, and in the future may possibly have, access to certain confidential
information of Dentist that is a valuable, special and unique asset of Dentist.
Pentegra agrees that it will not disclose such confidential information to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, unless (i) such information becomes available to or known by the
public generally through no fault of Pentegra, (ii) disclosure is required by
law or the order of any governmental authority under color of law, provided,
that prior to disclosing any information pursuant to this clause (ii), Pentegra
shall, if possible, give prior written notice thereof to the other parties
hereto, and provide such other parties hereto with the opportunity to contest
such disclosure, (iii) Pentegra reasonably believes that such disclosure is
required in connection with the defense of a lawsuit against the disclosing
party, or (iv) Pentegra is the sole and exclusive owner of such confidential
information
<PAGE>
as a result of the transaction contemplated hereunder or otherwise. In the
event of a breach or threatened breach by Pentegra of the provision of this
SECTION 13. Dentist shall be entitled to an injunction restraining Pentegra
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Pentegra from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. The obligations of the parties under this SECTION 13 shall
survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions
contemplated by this Agreement, together with the transactions contemplated
by the Other Agreement and the Initial Public Offering, will qualify as an
exchange meeting the requirements of Section 351 of the Code. The tax
returns (and schedules thereto) of Dentist and Pentegra shall be filed in a
manner consistent with such intention and Dentist and Pentegra shall each
provide the other with such tax information, reports, returns or schedules as
may be reasonably required to assist the other in so reporting the
transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Dentist:
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any
further acts and to execute
<PAGE>
and deliver any documents which may be reasonably necessary to carry out the
provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of
the parties to this Agreement shall pay all of the costs and expenses
incurred by such party in connection with the transactions contemplated by
this Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Dentist for services rendered in
connection with negotiating and closing the transactions contemplated by this
Agreement or the documents to be executed in connection herewith, whether or
not such costs or expenses are incurred before or after the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and
its terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Dentist.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF
TEXAS AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made
for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this
Agreement are integral parts of this Agreement as if fully set forth herein,
and all statements appearing therein shall be deemed disclosed for all
purposes and not only in connection with the specific representation in which
they are explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS AND THE ESCROW LETTER ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT
OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS
BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one and the
same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any entity
that, through one or more
<PAGE>
intermediaries is, controlled, controlled by or under common control with,
Pentegra. Upon any such assignment prior to the Closing, all references
herein to Pentegra (including those to Pentegra Common Stock) shall be deemed
to include references to the assignee and the assignee's common stock.
Notwithstanding any such assignment, Pentegra shall not, absent a written
release from Dentist, be relieved from its obligations to Dentist under this
Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Dentist, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Dentist (hereinafter referred to as a "Party"), whether made before or after
the institution of any legal proceeding, any dispute among the parties hereto
in any way arising out of, related to, or in connection with this Agreement
(hereinafter a "Dispute"), shall be resolved by binding arbitration in
accordance with the terms of this Section (hereinafter the "Arbitration
Program").
All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or preliminary judicial or non-judicial self help remedies for
the purposes of obtaining, perfecting, preserving, or foreclosing upon any
personal property in which there has been granted a security interest or lien
by a Party in the Documents. In Disputes involving indebtedness or other
monetary obligations, each Party agrees that the other Party may proceed
against all liable persons, jointly and severally against one or more of
them, without impairing rights against other liable persons. Nor shall a
Party be required to join the principal obligor or any other liable persons
(e.g., sureties or guarantors) in any proceeding against a particular person.
A Party may release or settle with one or more liable persons as the Party
deems fit without releasing or impairing rights to proceed against any
persons not so released. All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing, of
that Party's desire to arbitrate a dispute; and each Party shall, within twenty
(20) days from the date such notification is received, select an arbitrator, and
<PAGE>
those two arbitrators shall select a third arbitrator within ten (10) days
thereafter. The issues or claims in dispute shall be committed to writing,
separately stated and numbered, and each party's proposed answers or
contentions shall be signed below the questions. Failure by a party to select
an arbitrator within the prescribed time period shall serve as that Party's
acquiescence and acceptance of the other party's selection of arbitrator. The
arbitrators shall resolve all Disputes in accordance with the applicable
substantive law. Any Dispute shall be decided by a majority vote of three
arbitrators, unless the claim or amount in controversy does not exceed
$100,000.00, in which case a single arbitrator (who shall have authority to
render a maximum award of $100,000.00, including all damages of any kind,
costs and fees) may decide the Dispute. The arbitrators may grant any remedy
or relief that the arbitrators deem just and equitable and within the scope
of this Arbitration Program. The arbitrators may also grant such ancillary
relief as is necessary to make effective the award. In all arbitration
proceedings the arbitrators shall make specific and written findings of fact
and conclusions of law. In all arbitration proceedings in which the amount
in controversy exceeds $100,000.00, in the aggregate, the Parties shall have
in addition to the statutory right to seek vacation or modification of any
award pursuant to applicable law, the right to seek vacation or modification
of any award that is based in whole, or in part, on an incorrect or erroneous
ruling of law by appeal to an appropriate court having jurisdiction;
provided, however, that any such application for vacation or modification of
an award based on an incorrect ruling of law must be filed in a court having
jurisdiction over the Dispute within 15 days from the date the award in
rendered. The arbitrators' findings of fact shall be binding on all Parties
and shall not be subject to further review except as otherwise allowed by
applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoenix,
Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or by
applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be
found to be illegal, invalid or unenforceable under present or future laws,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such provision never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect. In lieu
of such provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such provision as may be
possible and be legal, valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
PENTEGRA DENTAL GROUP, INC.
By: /s/ James L. Dunn, Jr.
----------------------------------------
Its: Senior Vice President
---------------------------------------
/s/ Scott Van Zandt, D.D.S.
-------------------------------------------
Scott Van Zandt, D.D.S.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 [intentionally omitted]
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PENTEGRA DENTAL GROUP, INC.,
RONALD M. YAROS, D.D.S., P.C.
and
RON YAROS, D.D.S.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
Section 1. TERMS OF THE REORGANIZATION
1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . . . . . . . 2
1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . . . . 2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . 3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . . . . 3
2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 4
2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . . . . 4
2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . . . . 4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . . . . 4
2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . . . . 8
2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . . . . 9
2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . . . . 9
3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . . . . 9
3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . . . . 10
4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . . . 10
4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . 11
4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.17 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.18 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.19 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.20 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . . . . 12
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . . . 12
Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . . 13
7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . 13
7.7 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.8 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . . 14
8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
<PAGE>
Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . . . . . . 17
10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. TERMINATION
Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14. MISCELLANEOUS
14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.12 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.13 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.14 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.15 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.16 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and
executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC.,
a Delaware corporation ("Pentegra"), RONALD M. YAROS, D.D.S., P.C., a
Colorado professional corporation ("Company") and RON YAROS, D.D.S., the sole
shareholder of the Company (referred to herein as "Shareholder" or
"Shareholders").
WITNESSETH:
WHEREAS, Company operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;
WHEREAS, the Boards of Directors of the Company and Pentegra have
determined that a reorganization between each of them is in the best
interests of their respective companies;
WHEREAS, Pentegra or its affiliated designee has entered into or intends
to enter into Agreements and Plans of Reorganization, Asset Contribution
Agreements and other acquisition agreements (collectively, the "Other
Agreements") with such persons or entities or the stockholders of such
entities listed on EXHIBIT A (together with Company, the "Target Companies")
and simultaneously with the closing of the reorganization contemplated
herein, intends to consummate its initial public offering ("Initial Public
Offering") of shares of its common stock, par value $.01 per share ("Pentegra
Common Stock");
WHEREAS, it is intended for Federal income tax purposes that the
reorganization contemplated by this Agreement shall qualify as an
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended ("IRC" or "Code");
WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon,
the simultaneous consummation of the transfers contemplated by the Other
Agreements and the Initial Public Offering.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. TERMS OF THE REORGANIZATION.
1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.2 MERGER. Subject to and upon the terms and conditions contained
herein, on the Closing Date, the Company shall be merged with and into
Pentegra (or its designated affiliate, in which case, the references herein
to Pentegra shall be to such designated affiliate and its shares of common
stock) in accordance with this Agreement and the separate corporate existence
of the Company shall thereupon cease
<PAGE>
("Merger"). Pentegra shall be the surviving corporation in the Merger
("Surviving Corporation") and shall continue to be governed by the laws of
the State of Delaware and the separate corporate existence of Pentegra with
all rights, privileges, powers, immunities and purposes shall continue
unaffected by the Merger. The Merger shall have the effects specified in the
Delaware General Corporation Law and the Colorado Business Corporation Law.
If all the conditions to the Merger set forth herein shall have been
fulfilled or waived in accordance herewith and this Agreement shall not have
been terminated in accordance herewith, the parties hereto shall cause to be
properly executed and filed on the Closing Date Certificates of Merger for
the Company meeting the applicable legal requirements. The Mergers shall
become effective on the Closing Date or the filing of such documents, in
accordance with applicable law, or at such later time as the parties hereto
have agreed upon and designated in such merger filings.
1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of
Incorporation and Bylaws of Pentegra shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation until duly amended in
accordance with their terms.
1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra
immediately prior to the effective date of the Merger shall be the directors
of the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal
in accordance with the Surviving Corporation's Certificate of Incorporation
and Bylaws. The persons who are officers of Pentegra immediately prior to
the effective date of the Merger shall be the officers of the Surviving
Corporation and shall hold their respective offices until their successors
have been duly elected or appointed and qualified or until their earlier
death, resignation or removal.
1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and
without any action on the part of the holder thereof, all shares of the
Company's common stock issued and outstanding on the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired and
shall cease to exist, and each holder of a certificate of representing shares
of Company common stock shall thereafter cease to have any rights with
respect to such shares except the right to receive the consideration set
forth on ANNEX I attached hereto (the "Merger Consideration"). Each share of
common stock of the Company held in treasury at the effective date of the
Merger shall cease to be outstanding and shall be cancelled and retired
without payment of any consideration therefor. On the effective date of the
Merger, each share of Pentegra Common Stock issued and outstanding shall, by
virtue of he Mergers, and without any action on the part of the holder
thereof, continue unchanged and remain outstanding as a share of validly
issued, fully paid and nonassessable share of Surviving Corporation common
stock.
1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the
Merger, the Shareholders, as the holders of a certificate or certificates
representing shares of Company common stock shall, upon surrender of such
certificate or certificates, receive the Merger Consideration, and until the
certificate or certificates of Company common stock shall have been
surrendered by the Shareholder and replaced by a certificate or certificates
representing Pentegra Common Stock (as set forth on ANNEX I), the certificate
or certificates of Company common stock shall, for all purposes be deemed to
evidence ownership of the number of shares of Pentegra Common Stock
determined in accordance with the provisions of ANNEX I. All shares of
Pentegra Common Stock issuable to the Shareholders in the Merger shall be
deemed for all purposes to have been issued by Pentegra on the Closing Date.
The Shareholders shall deliver to Pentegra at Closing the certificate or
certificates representing the Company common stock owned by them, duly
endorsed in blank by the Shareholders, or accompanied by duly executed blank
stock powers, and with all necessary transfer tax and other revenue stamps,
acquired at the Shareholder's expense, affixed and cancelled.
1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under
<PAGE>
any of the Assets or otherwise to carry out this Agreement, in return for the
consideration set forth in this Agreement, the Company and Shareholders shall
excecute and deliver all such deeds, bills of sale, assignments and
assurances and take and do all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under the Assets in Pentegra or otherwise to carry
out this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional
corporation or association, as applicable, duly organized, validly existing
and in good standing under the laws of the State of Colorado. Company has
all necessary corporate powers to own all of its assets and to carry on its
business as such business is now being conducted. Company does not own stock
in or control, directly or indirectly, any other corporation, association or
business organization, nor is Company a party to any joint venture or
partnership. The Shareholders are the sole shareholders of Company and own
all outstanding shares of capital stock free of all security interests,
claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each
share of Company's common stock has been legally and validly issued and fully
paid and nonassessable. No shares of capital stock of Company are owned by
Company in treasury. There are no outstanding (a) bonds, debentures, notes or
other obligations the holders of which have the right to vote with the
stockholders of Company on any matter, (b) securities of Company convertible
into equity interests in Company, or (c) commitments, options, rights or
warrants to issue any such equity interests in Company, to issue securities
of Company convertible into such equity interests, or to redeem any
securities of Company. No shares of capital stock of Company have been
issued or disposed of in violation of the preemptive rights, rights of first
refusal or similar rights of any of Company's stockholders. Company is not
required to qualify to do business as a foreign corporation in any other
state or jurisdiction by reason of its business, properties or activities in
or relating to such other state or jurisdiction. Company does not have any
assets, employees or offices in any state other than the state set forth in
the first sentence of this SECTION 2.1.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate
power to execute, deliver and perform this Agreement and all agreements and
other documents executed and delivered by it pursuant to this Agreement or to
be executed and delivered on the Closing Date, and has taken all action
required by law, its Articles or Certificate of Incorporation, its Bylaws or
otherwise, to authorize the execution, delivery and performance of this
Agreement and such related documents. Each Shareholder has the legal
capacity to enter into and perform this Agreement and the other agreements to
be executed and delivered in connection herewith. Company has obtained the
approval of its stockholders necessary to the consummation of the
transactions contemplated herein. This Agreement and all agreements and
documents executed and delivered in connection herewith have been, or will be
as of the Closing Date, duly executed and delivered by Company and
Shareholders, as appropriate, and constitute or will constitute the legal,
valid and binding obligations of Company and Shareholders, enforceable
against Company and Shareholders in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable
remedies. The execution and delivery of this Agreement, and the agreements
executed and delivered pursuant to this Agreement or to be executed and
delivered on the Closing Date, do not, and, subject to the receipt of
consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, violate any provision of the Articles or
Certificate of Incorporation or Bylaws of Company or any provisions of, or
result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or
decree to which Company or any Shareholder is a party or by which Company or
any Shareholder is bound, or violate any material restrictions of any kind to
which Company is subject, or result in any lien or encumbrance on any of
Company's assets or the Assets.
<PAGE>
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to
the knowledge of Company and Shareholders, threatened, which may result in
the revocation, cancellation or suspension, or any adverse modification, of
any such licenses or permits.
2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Company or Shareholders.
2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind has been declared or paid by Company on any of its capital stock
since the Balance Sheet Date. No repurchase of any of Company's capital
stock has been approved, effected or is pending, or is contemplated by
Company.
2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Company and all
amendments thereto have been delivered to Pentegra. The minute books of
Company contain accurate minutes of all meetings of and consents to actions
taken without meetings of the Board of Directors and stockholders of Company
since its formation. The books of account of Company have been kept
accurately in the ordinary course of business and the revenues, expenses,
assets and liabilities of Company have been properly recorded in such books.
2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any
related unaudited statements of income, retained earnings, schedule of
accounts receivable, accounts payable and accrued liabilities, and cash flows
for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Company as of
the dates and for the periods indicated and reflect all fixed and contingent
liabilities of Company.
2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Company or any Shareholder leases, as lessor or lessee,
real or personal property used in operating the Business, related to the
Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and
enforceable in accordance with their respective terms, and there is not under
any such lease any existing default by Company, as lessor or lessee, or any
condition or event of which any Shareholder or Company has knowledge which
with notice or lapse of time, or both, would constitute a default, in respect
of which Company or Shareholders have not taken adequate steps to cure such
default or to prevent a default from occurring.
2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Company and Shareholders have no
knowledge of any latent defects therein.
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances
set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to
<PAGE>
the Closing Date and evidence of such releases of liens and claims shall be
provided to Pentegra on the Closing Date and the Assets shall not be used to
satisfy such liens, claims or encumbrances.
2.11 INVENTORIES. All of the Assets constituting inventory are owned
or used by Company, are in good, current, standard and merchantable condition
and are not obsolete or defective.
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Company has no right, title or interest in or to patents, patent
rights, corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in
EXHIBIT 2.12 is a listing of all names of all predecessor companies of
Company, including the names of any entities from whom Company previously
acquired significant assets. Except for off-the-shelf software licenses and
except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets
or similar items and no such licenses are necessary for the conduct of the
Business or the use of the Assets. No claim is pending or has been made to
the effect that the Assets or the present or past operations of Company in
connection with the Assets or Business infringe upon or conflict with the
asserted rights of others to any patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, licenses,
specialized treatment protocols, copyrights, formulas, know-how and trade
secrets. Company has the sole and exclusive right to use all Assets
constituting proprietary rights without infringing or violating the rights of
any third parties and no consents of any third parties are required for the
use thereof by Pentegra.
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth
on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date
of this Agreement of: (a) the name of each director and officer of Company
and the offices held by each, (b) the most recent payroll report of Company,
showing all current employees of Company and their current levels of
compensation, (c) promised increases in compensation of employees of Company
that have not yet been effected, (d) oral or written employment agreements,
consulting agreements or independent contractor agreements (and all
amendments thereto) to which Company is a party, copies of which have been
delivered to Pentegra, and (e) all employee manuals, materials, policies,
procedures and work-related rules, copies of which have been delivered to
Pentegra. Company is in compliance with all applicable laws, rules,
regulations and ordinances respecting employment and employment practices.
Company has not engaged in any unfair labor practice. There are no unfair
labor practices charges or complaints pending or threatened against Company,
and Company has never been a party to any agreement with any union, labor
organization or collective bargaining unit.
2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the
Business nor any of the Assets is subject to any pending, nor does Company or
any Shareholder have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Company, any Shareholder, the Business, the Assets or the
transactions contemplated by this Agreement, and, to the knowledge of Company
and Shareholders, no basis for any such action exists, nor is there any legal
impediment of which Company or any Shareholder has knowledge to the continued
operation of its business or the use of the Assets in the ordinary course,
subject to consents set forth on EXHIBIT 2.4.
2.15 CONTRACTS. Company has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Company ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted or may be made
by any party thereto. Except as indicated on such Exhibits, there is not
under any such Contract any existing default
<PAGE>
by Company or any Shareholder, or any condition or event of which Company or
any Shareholder has knowledge which with notice or lapse of time, or both,
would constitute a default. Company and Shareholders have no knowledge of any
default by any other party to such Contracts. Company and Shareholders have
not received notice of the intention of any party to any Contract to cancel
or terminate any Contract and have no reason to believe that any amendment or
change to any Contract is contemplated by any party thereto. Other than those
contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13
and EXHIBIT 2.15, Company are not a party to any material written or oral
agreement contract, lease or arrangement, including without limitation, any:
(a) Contract related to the Assets other than this Agreement;
(b) Employment, consulting or compensation agreement or arrangement;
(c) Labor or collective bargaining agreement;
(d) Lease agreement with respect to any property, whether as lessor
or lessee;
(e) Deed, bill of sale or other document evidencing an interest in
or agreement to purchase or sell real or personal property;
(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;
(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;
(h) Loan agreement or other contract for money borrowed or lent or
to be borrowed or lent to another;
(i) Contracts containing non-competition covenants;
(j) Financial or similar contracts or agreements with patients of
the Company or Shareholders, oral or written, that provide for prepayments or
deferred installment payments; or
(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Company on more than 30 days after the date hereof.
2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company
has not, since the Balance Sheet Date:
(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement;
(b) Discharged or satisfied any material lien or encumbrance, or
paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(c) Formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
<PAGE>
(d) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;
(e) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;
(f) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of Company since the Balance Sheet
Date;
(g) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;
(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;
(i) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants
or agents, or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant
or agent;
(j) Authorized or incurred any capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00);
(k) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;
(l) Redeemed, purchased, sold or issued any stock, bonds or other
securities;
(m) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties,
assets or business or the Business or the Assets, or experienced any other
material adverse change in its financial condition, assets, prospects,
liabilities or business;
(n) Declared or paid a distribution, payment or dividend of any
kind on the capital stock of Company;
(o) Repurchased, approved any repurchase or agreed to repurchase
any of Company's capital stock; or
(p) Suffered any material adverse change in the Business or to the
Assets.
2.17 TAXES. (a) Company has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it. All such tax returns are complete and accurate in all
respects and properly reflect the relevant taxes for the periods covered
thereby. Company has not received any notice that any tax deficiency or
delinquency has been or may be asserted against Company. There are no
audits relating to taxes of Company pending or in process or, to the
knowledge of Company, threatened. Company is not currently the beneficiary of
any waiver of any statute of limitations in respect of taxes nor of any
extension of time within which to file any tax return or to pay any tax
assessment or deficiency. There are no liens or encumbrances relating to
taxes on or threatened against any of the assets of Company. Company has
withheld
<PAGE>
and paid all taxes required by law to have been withheld and paid by it.
Neither Company nor any predecessor of Company is or has been a party to any
tax allocation or sharing agreement or a member of an affiliated group of
corporations filing a consolidated Federal income tax return. Company has
delivered to Pentegra correct and complete copies of Company's three most
recently filed annual state, local and Federal income tax returns, together
with all examination reports and statements of deficiencies assessed against
or agreed to by Company during the three calendar year period preceding the
date of this Agreement. Company has neither made any payments, is obligated
to make any payments, or is a party to any agreement that under any
circumstance could obligate it to make any payments that will not be
deductible under Code section 280G.
(b) No Shareholder presently intends to dispose of any of the shares of
Pentegra Common Stock to be received hereunder nor is a party to any plan,
arrangement or agreement for the disposition of such shares. Company and
Shareholders have no knowledge, after due inquiry, of any such intent, plan,
arrangement or agreement by any Shareholder. Nothing contained herein shall
prohibit Shareholders from selling such shares of Pentegra Common Stock after
the designated holding period and in accordance with SECTION 12.1 hereof.
2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated
by this Agreement which may be now or hereafter asserted against Pentegra,
Company or Company's shareholders resulting from any action taken by Company
or any Shareholder or their respective agents or employees, or any of them.
2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Company did not have, as of the Balance Sheet
Date, and has not incurred since that date and will not have incurred as of
the Closing Date, any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
other than those incurred in the ordinary course of business or as set forth
on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable
grounds to know, of any basis for the assertion against Company or any
Shareholder as of the Balance Sheet Date, of any claim or liability of any
nature in any amount not fully reflected or reserved against on the Balance
Sheet, or of any claim or liability of any nature arising since that date
other than those incurred in the ordinary course of business or contemplated
by this Agreement. All indebtedness of Company (including without
limitation, indebtedness for borrowed money, guaranties and capital lease
obligations) is described on EXHIBIT 2.19 attached hereto.
2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed
professional of Company carries property, liability, malpractice, workers'
compensation and such other types of insurance as is customary in the
industry. Valid and enforceable policies in such amounts are outstanding and
duly in force and will remain duly in force through the Closing Date. All
such policies are described in EXHIBIT 2.20 attached hereto and true and
correct copies have been delivered to Pentegra. Neither Shareholders nor
Company have not received notice or other communication from the issuer of
any such insurance policy cancelling or amending such policy or threatening
to do so. Neither Company, nor any Shareholder nor any licensed professional
employee of Company has any outstanding claims, settlements or premiums owed
against any insurance policy.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Company has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company
<PAGE>
Plan," and collectively "Company Plans") have been operated and administered
in all material respects in accordance with all applicable laws, rules and
regulations, including without limitation, ERISA, the Internal Revenue Code
of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment
Act of 1967, as amended, and the related rules and regulations adopted by
those Federal agencies responsible for the administration of such laws. No
act or failure to act by Company has resulted in a "prohibited transaction"
(as defined in ERISA) with respect to the Company Plans. No "reportable
event" (as defined in ERISA) has occurred with respect to any of the Company
Plans. Company has not previously made, is not currently making, and is not
obligated in any way to make, any contributions to any multiemployer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
With respect to each Company Plan, either (i) the value of plan assets
(including commitments under insurance contracts) is at least equal to the
value of plan liabilities or (ii) the value of plan liabilities in excess of
plan assets is disclosed on the Balance Sheet, all as of the Closing Date.
2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the
Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Company, the Business or the Assets.
2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and
Company's licensed professional employees, and the conduct of the Business
and use of the Assets, have complied with all applicable laws, rules,
regulations and licensing requirements, including, without limitation, the
Federal Environmental Protection Act, the Occupational Safety and Health Act,
the Americans with Disabilities Act and any environmental laws and medical
waste laws, and there exist no violations by Company, any Shareholder or any
licensed professional employee of Company of any Federal, state or local law
or regulation. Company and Shareholders have not received any notice of a
violation of any Federal, state and local laws, regulations and ordinances
relating to the operations of the Business and Assets and no notice of any
pending inspection or violation of any such law, regulation or ordinance has
been received by Company.
2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed
professional employee or independent contractor of Company has timely filed
all claims or other reports required to be filed with respect to the purchase
of services by third-party payors, and all such claims or reports are
complete and accurate, and has no liability to any payor with respect
thereto. There are no pending appeals, overpayment determinations,
adjustments, challenges, audit, litigation or notices of intent to open
Medicare or Medicaid claim determinations or other reports required to be
filed by Company, any Shareholder and each licensed professional employee of
Company. Neither Company, nor any Shareholder, nor any licensed professional
employee of Company has been convicted of, or pled guilty or nolo contendere
to, patient abuse or negligence, or any other Medicare or Medicaid program
related offense and none has committed any offense which may serve as the
basis for suspension or exclusion from the Medicare and Medicaid programs or
any other third party payor program. With respect to payors, Company,
Shareholders and Company's licensed professional employees has not (a)
knowingly and willfully making or causing to be made a false statement or
representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights
to any benefit or payment; (c) failed to disclose knowledge of the occurrence
of any event affecting the initial or continued right to any benefit or
payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.
2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company
or Shareholders in this Agreement, and no Exhibit or certificate issued or
executed by, or information furnished by, officers or directors of Company or
any Shareholder and furnished or to be furnished to Pentegra pursuant hereto,
or in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a
<PAGE>
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Company has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer,
employee, director or stockholder of Company, or their respective spouses,
children or affiliates, owns directly or indirectly, on an individual or
joint basis, any interest in, has a compensation or other financial
arrangement with, or serves as an officer or director of, any customer or
supplier or competitor of Company or any organization that has a material
contract or arrangement with Company.
2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list
of the names and addresses of each payor of Company's services which
accounted for more than 10% of revenues of Company in the preceding fiscal
year. Company has good relations with all such payors and other material
payors of Company and none of such payors has notified Company that it
intends to discontinue its relationship with Company or to deny any claims
submitted to such payor for payment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.
Pentegra hereby represents and warrants to Company and Shareholders as
follows:
3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.
3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon
<PAGE>
Pentegra. Other than as would not have a material adverse effect, there are
no proceedings pending or, to the knowledge of Pentegra, threatened, which
may result in the revocation, cancellation or suspension, or any adverse
modification, of any such licenses or permits.
3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has knowledge to the continued operation of its business or the use
of its Assets in the ordinary course.
3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary of any waiver of any
statute of limitations in respect of taxes nor of any extension of time
within which to file any tax return or to pay any tax assessment or
deficiency.
3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.
3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the reorganization contemplated
hereby will be as of the Closing Date duly and validly authorized by all
necessary corporate action on the part of Pentegra. The Pentegra Common
Stock to be issued in connection with the reorganization contemplated hereby,
when issued in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable.
3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Company or any
Shareholder pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.
SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS.
Company and Shareholders, jointly and severally, agree that between the
date hereof and the Closing Date:
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall
use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions. Company
and Shareholders agree to complete the Exhibits hereto to be provided by them
in form and substance satisfactory to Pentegra.
4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the
Business and use the Assets in the ordinary course. Company and Shareholders
shall not enter into any lease, contract, indebtedness, commitment, purchase
or sale or acquire or dispose of any capital asset relating to the Business
or the Assets except in the ordinary course of business. Company and
Shareholders shall use their best efforts to preserve the Business and Assets
intact and shall not take any action that would have an adverse effect on the
Business or Assets. Company and Shareholders shall use their best efforts to
preserve intact the
<PAGE>
relationships with payors, customers, suppliers, patients and others having
significant business relations with Company. Company and Shareholders shall
collect its receivables and pay its trade payables in the ordinary course of
business. Company and Shareholdes shall not introduce any new method of
management, operations or accounting.
4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra
and its authorized representatives access to, and make available for
inspection, all of the assets and business of Company, the Business and the
Assets, including employees, customers and suppliers and permit Pentegra and
its authorized representatives to inspect and make copies of all documents,
records and information with respect to the business or assets of Company,
the Business or the Assets as Pentegra or its representatives may request.
Company and Shareholders shall promptly notify Pentegra in writing of (a) any
notice or communication relating to a default or event that, with notice or
lapse of time or both, could become a default, under any contract, commitment
or obligation to which Company is a party or relating to the Business or the
Assets, and (b) any adverse change in Company's or the Business' financial
condition or the Assets.
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and
Shareholders shall use their best efforts to secure all necessary approvals
and consents of third parties to the consummation of the transactions
contemplated hereby, including consents described on EXHIBIT 2.4. Company
and Shareholders shall use their best efforts to obtain all licenses,
permits, approvals or other authorizations required under any law, rule,
regulation, or otherwise to provide the services of the Practice contemplated
by the Service Agreement and to conduct the intended business of the Practice
and operate the Business and use the Assets.
4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until
the earlier of Closing or the termination of this Agreement in accordance
with the provisions hereof, Company and Shareholders shall not, and shall use
its best efforts to cause Company's employees, agents and representatives not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or
the making or implementation of any proposal or offer, including without
limitation, any proposal or offer to any Shareholder, with respect to a
merger, acquisition, consolidation or similar transaction involving, or the
purchase of all or any significant portion of the assets or any equity
securities of Company or engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person relating to such proposal or offer, and Company and Shareholders will
immediately cease any such activities, discussions or negotiations heretofore
conducted with respect to any of the foregoing. Company and Shareholders
shall immediately notify Pentegra if any such inquiries or proposals are
received.
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund
completely for any accrued benefits, where applicable, or vested accrued
benefits for which Company or any entity might have any liability whatsoever
arising from any insurance, pension plan, employment tax or similar
liability of Company to any employee or other person or entity (including,
without limitation, any Company Plan and any liability under employment
contracts with Company) allocable to services performed prior to the Closing
Date. Company and Shareholders acknowledge that the purpose and intent of
this covenant is to assure that Pentegra shall have no unfunded liability
whatsoever at any time after the Closing Date with respect to any of
Company's employees or similar persons or entities, including, without
limitation, any Company Plan for the period prior to the Closing Date.
4.7 EMPLOYEE MATTERS. Company shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash
compensation of any Shareholder (other than in the ordinary course of
business) or other employee or an independent contractor of Company, adopt,
amend or terminate any compensation plan, employment agreement, independent
contractor agreement, employee policies and procedures or employee benefit
plan, take any action that could deplete the assets of any employee benefit,
or fail to pay any premium or contribution due or file any report with
respect to any employee benefit plan, or take any other actions with respect
to its employees or employee matters which might have an adverse effect
<PAGE>
upon Company, its business, assets or prospects.
4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend
of any kind will be declared or paid by Company, nor will any repurchase of
any of Company's capital stock be approved or effected.
4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders
shall use their best efforts to take, or cause to be taken, all actions
necessary to effect the reorganization contemplated hereby under applicable
law.
4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not
change in any material respect the tax or financial accounting methods or
practices followed by Company (including any material change in any
assumption underlying, or any method of calculating, any bad debt,
contingency or other reserve), except as may be required by law or generally
accepted accounting principles. Company and Shareholders will duly,
accurately and timely (without regard to any extensions of time) file all
returns, information statements and other documents relating to taxes of
Company required to be filed by it, and pay all taxes required to be paid by
it, on or before the Closing Date.
4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and
Company hereby waive any compliance with the applicable state Bulk Transfers
Act, if any. Company and Shareholders covenant and agree that all of the
creditors with respect to the Business and the Assets will be paid in full by
Company prior to the Closing Date, except to extent that any liability to
such creditors is assumed by Pentegra pursuant to this Agreement. If
required by Pentegra, Company and Shareholders shall furnish Pentegra with
proof of payment of all creditors with respect to the Business and the
Assets. Notwithstanding the foregoing, Company and Shareholders may dispute
the validity or amount of any such creditor's claim without being deemed to
be in violation of this SECTION 4.11, provided that such dispute is in good
faith and does not unreasonably delay the resolution of the claim and
provided, further that Company and Shareholders agree to indemnify and bond
Pentegra for such amounts as is satisfactory to Pentegra.
4.12 LEASE. If Company leases any of its premises from any Shareholder
or other affiliate of Company or any shareholder of Company, Pentegra shall
have entered into a building lease (the "Building Lease") with the owner of
such premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, (i) a five year
initial term plus three five-year renewal options, (ii) a lease rate equal to
the fair market value lease rate, as agreed to by Pentegra, and (iii) such
other provisions to be acceptable to Pentegra.
4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with
all requests made by Pentegra for the purpose of allowing Pentegra to hire
those non-dentist employees of Company designated by Pentegra, such
employment to be effective as of the Closing Date. Notwithstanding the
above, Company and Shareholders shall remain liable under any Company Plans
for any claims incurred by any employees or their spouses or dependents, and
for all compensation, bonuses, benefits and other such items and other
liabilities related to Company's employees incurred by Company prior to the
Closing Date.
4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all
employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall
be treated as "leased employees" (as defined in Code Section 414(n)) of
Company and shall be treated as Clinic employees for purposes of eligibility
and participation in Company Plans.
4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective
as of the Closing Date.
<PAGE>
4.16 [INTENTIONALLY DELETED]
4.17 [INTENTIONALLY DELETED]
4.18 [INTENTIONALLY DELETED]
4.19 [INTENTIONALLY DELETED]
4.20 [INTENTIONALLY DELETED]
SECTION 5. COVENANTS OF PENTEGRA.
Pentegra agrees that between the date hereof and the Closing:
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its
best efforts to cause the consummation of the transactions contemplated
hereby in accordance with their terms and provisions. Pentegra agrees to
complete the Exhibits hereto to be provided by it.
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra
shall use its best efforts to secure all necessary approvals and consents of
third parties to the consummation of the transactions contemplated hereby.
SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS.
Pentegra, Shareholders and Company agree as follows:
6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall
cooperate to promptly prepare and file with the Securities Exchange Commission
("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to
be filed by Pentegra in connection with its Initial Public Offering (including
the prospectus constituting a part thereof, the "Registration Statement").
Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits
and approvals required to carry out the transactions contemplated by this
Agreement and the Company and Shareholders shall furnish all information
concerning Company and Shareholders as may be reasonable requested in connection
with any such action.
Company and Shareholder represent and warrant that none of the
information or documents supplied or to be supplied by it specifically for
inclusion in the Registration Statement, by exhibit or otherwise, will, at
the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act of 1933, 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, in
light of the circumstances under which they were made, not misleading.
Company and Shareholders shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.
Company and Shareholders shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by Pentegra
in connection with the preparation of the Registration Statement and each
amendment or supplement thereto, or any other statement, filing, notice or
application made by or on behalf of each such party or any of its subsidiaries
to any governmental entity in connection with the transactions contemplated by
the Other Agreements or this Agreement.
<PAGE>
SECTION 7. PENTEGRA CONDITIONS PRECEDENT.
The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Company and Shareholders contained herein shall have been true
and correct in all respects when initially made and shall be true and correct
in all respects as of the Closing Date.
7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Company and Shareholders prior to
the Closing Date.
7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Company shall have occurred since the Balance Sheet Date.
7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Company, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.
7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.
7.7 [INTENTIONALLY DELETED]
7.8 [INTENTIONALLY DELETED]
7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have
obtained all necessary government and other third-party approvals and
consents.
7.10 CLOSING DELIVERIES. Pentegra shall have received all
documents, duly executed in form satisfactory to Pentegra and its counsel,
referred to in SECTION 9.1.
7.11 DEBT AND RECEIVABLES. There shall be no indebtedness,
receivables or payables betwene Company and its shareholders or affiliates
and Company shall not have any liabilities, including indebtedness,
guaranties and capital leases, that are not set forth on EXHIBIT 2.19.
7.12 INSURANCE. Company and Shareholders shall have named Pentegra
as an additional insured on their liability insurance program in accordance
with SECTION 4.15.
7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no
material change in the working capital of Company since the Balance Sheet
Date.
7.14 SECURITIES APPROVAL. The Registration Statement shall have
become effective under
<PAGE>
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. At or prior to
the date that the Registration Statement is declared effective by the SEC,
Pentegra shall have received all state securities and "Blue Sky" permits
necessary to consummate the transactions contemplated hereby. The Pentegra
Common Stock shall have been approved for listing on Nasdaq or other exchange
selected by Pentegra, subject only to official notification of issuance.
SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT.
The obligations of Company and Shareholders hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Pentegra contained herein shall have been true and correct in
all respects when initially made and shall be true and correct in all
respects as of the Closing Date.
8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.
8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
8.4 CLOSING DELIVERIES. Company shall have received all documents,
duly executed in form satisfactory to Company and its counsel, referred to in
SECTION 9.2.
8.5 SECURITIES APPROVAL. 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. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.
SECTION 9. CLOSING DELIVERIES.
9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business
days after requested by Pentegra, Company and Shareholders shall deliver to
Pentegra the following, all of which shall be in a form satisfactory to
counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel
for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or
letter agreement in form and substance mutually acceptable to the parties
hereto:
(a) [intentionally deleted];
(b) [intentionally deleted];
(c) a copy of the resolutions of the Board of Directors of Company
authorizing the execution, delivery and performance of this Agreement and all
related documents and agreements each certified by the Secretary as being
true and correct copies of the original thereof;
<PAGE>
(d) executed merger certificate and/or plan as required by applicable
state law;
(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra and the original stock certificates
together with blank stock powers representing the outstanding shares of
Company common stock;
(f) certificates of the Shareholders and a duly authorized officer
of Company dated as of the Closing Date, (i) as to the truth and correctness
of the representations and warranties of Company and Shareholder contained
herein; (ii) as to the performance of and compliance by Company and
Shareholder with all covenants contained herein; and (iii) certifying that
all conditions precedent of Company and Shareholders to the Closing have been
satisfied;
(g) a certificate of the Secretary of Company certifying as to the
incumbency of the directors and officers of Company and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Company;
(h) a certificate, dated within 30 days of the Closing Date, of the
Secretary of the State of incorporation of Company and any state of required
foreign qualification of Company establishing that Company is in existence
and is in good standing to transact business in its state of incorporation;
(i) an opinion of counsel to Company and Shareholder opining as to
the execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Company, the enforceability of this Agreement and the other agreements and
documents to be executed in connection herewith, and other matters reasonably
requested by Pentegra;
(j) non-foreign affidavits executed by Company;
(k) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;
(l) an executed Registration Rights Agreement between Pentegra and
Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and
(m) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement and
any other instruments and agreements reasonably requested by Pentegra in
connection with any service arrangements to be provided by Pentegra to
Shareholder.
9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Company and Shareholders, the following, all of which shall
be in a form satisfactory to counsel to Company and Shareholders and shall be
held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending
Closing, pursuant to an escrow agreement or letter agreement in form and
substance mutually acceptable to the parties hereto:
(a) the Merger Consideration;
(b) [intentionally deleted];
(c) an assumption of each contract, agreement and lease being
assigned to and assumed by Pentegra;
<PAGE>
(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements each certified by
the Secretary as being true and correct copies of the original thereof;
(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;
(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Pentegra;
(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and the
State of incorporation of Company;
(h) an opinion of counsel to Pentegra opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Pentegra, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Company;
(i) the executed Registration Rights Agreement; and
(j) such other instruments and documents as reasonably requested by
Company to carry out and effect the purpose and intent of this Agreement.
SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
10.1 NATURE AND SURVIVAL. All statements contained in this
Agreement or in any Exhibit attached hereto, any agreement executed pursuant
hereto, and any certificate executed and delivered by any party pursuant to
the terms of this Agreement, shall constitute representations and warranties
of Company and Shareholders, jointly and severally, or of Pentegra, as the
case may be. All such representations and warranties, and all
representations and warranties expressly labeled as such in this Agreement
shall survive the date of this Agreement and the Closing Date for a period of
five (5) years following the Closing Date, except that (i) the
representations and warranties with respect to environmental and medical
waste laws and health care laws and matters shall survive for a period of
fifteen (15) years and tax representations shall survive until one year after
the expiration of the applicable statute of limitations. Each party covenants
with the other parties not to make any claim with respect to such
representations and warranties, against any party after the date on which
such survival period shall terminate. No party shall be entitled to claim
indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof,
unless such party has timely given the notice required in SECTION 10.2, 10.3
or 10.4 hereof, as the case may be. Each party hereby releases, acquits and
discharges the other party from any and all claims and demands, actions and
causes of action, damages, costs, expenses and rights of setoff with respect
to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable,
are not timely provided.
10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS
SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"),
SHALL INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES
(EACH OF THE
<PAGE>
FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF
THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN
"INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES,
LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING,
BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH
APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY,
AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE
FURNISHED BY INDEMNITOR HEREUNDER, AND
(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND
(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE
THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND,
PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS
SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"),
JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES,
OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE
FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE
EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND
AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS,
COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE
FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON
OF OR RESULTING FROM OR WITH RESPECT TO:
(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY,
AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO
BE FURNISHED BY INDEMNITOR HEREUNDER,
(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S
MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE
<PAGE>
ASSETS,
(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES,
AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON
OR AFTER THE CLOSING DATE,
(D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR
CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE
OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR
OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS
SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER
ON OR AFTER THE CLOSING DATE,
(E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR
ENTITY RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM
OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
(F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND
EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN
CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN
CONNECTION HEREWITH,
(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,
(H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR
(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS
SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS
SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE
REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO
MAKE THE STATEMENTS THEREIN NOT MISLEADING.
IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT
ENTITLED TO INDEMNIFICATION HEREUNDER.
10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after
Indemnified Person receives written notice of the commencement of any action
or other proceeding in respect of which indemnification or reimbursement may
be sought hereunder, or within such lesser time as may be provided by law for
the defense of such action or proceeding, such Indemnified Person shall
notify Indemnitor thereof. If any such action or other proceeding shall be
brought against any Indemnified Person, Indemnitor shall, upon written notice
given
<PAGE>
within a reasonable time following receipt by Indemnitor of such notice
from Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.
10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Company or any Shareholder giving
rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra
shall be entitled to offset the amount of damages incurred by it as a result
of such breach of warranty, representation, covenant or agreement against any
amounts payable by Pentegra hereunder or under any other agreements executed
between Pentegra and Shareholder.
SECTION 11. TERMINATION. This Agreement may be terminated:
(a) at any time by mutual agreement of all parties;
(b) at any time by Pentegra if any representation or warranty of
Company or any Shareholder contained in this Agreement or in any certificate
or other document executed and delivered by Company or any Shareholder
pursuant to this Agreement is or becomes untrue or breached in any material
respect or if Company or any Shareholder fails to comply in any material
respect with any covenant or agreement contained herein, and any such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;
(c) at any time by Company or any Shareholder if any representation
or warranty of Pentegra contained in this Agreement or in any certificate or
other document executed and delivered by Pentegra pursuant to this Agreement
is or becomes untrue or breached in any material respect or if Pentegra fails
to comply in any material respect with any covenant or agreement contained
herein and such misrepresentation, noncompliance or breach is not cured,
waived or eliminated within twenty (20) days after receipt of written notice
thereof;
(d) by Pentegra, Shareholders or Company if the transaction
contemplated hereby shall not have been consummated by December 31, 1997; or
(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Company, that such termination is
desirable and in the best interests of Pentegra.
SECTION 12. TRANSFER REPRESENTATIONS.
12.1 TRANSFER RESTRICTIONS. For a period of one year from the
Closing Date, Shareholder shall not
<PAGE>
voluntarily (a) sell, assign, exchange, transfer, encumber, pledge,
distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common
Stock received by such party hereunder, (ii) any interest (including without
limitation, an option to buy or sell) in any shares of Pentegra Common Stock,
in whole or in part, and no such attempted transfer shall be treated as
effective for any purpose or (b) engage in any transaction, whether or not
with respect to any shares of Pentegra Common Stock or any interest therein,
the intent or effect of which is to reduce the risk of owning shares of
Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock
delivered to Company pursuant to the terms hereof will bear a legend
substantially in the form set forth below and containing such other
information as Pentegra may deem necessary or appropriate:
The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.
12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge
that the shares of Pentegra Common Stock to be delivered to Company pursuant
to this Agreement have not been and will not be registered under the
Securities Act of 1933 and may not be resold without compliance with the
Securities Act of 1933. The Pentegra Common Stock to be acquired by
Shareholders pursuant to this Agreement is being acquired solely for its own
account, for investment purposes only and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution. Each Shareholder covenants, warrants and represents that none
of the shares of Pentegra Common Stock issued to it will be offered, sold,
assigned, pledged, hypothecated, transferred or otherwise disposed of except
after full compliance with all of the applicable provisions of the Securities
Act, as amended, and the rules and regulations of the Securities Exchange
Commission and applicable state securities laws and regulations. All
certificates evidencing shares of Pentegra Common Stock shall bear the
following legend in addition to the legend referenced in SECTION 12.1.
The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.
In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Company resides.
12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear
the economic risk of an investment in Pentegra Common Stock acquired
pursuant to this Agreement and can afford to sustain a total loss of such
investment and have such knowledge and experience in financial and business
matters that they are capable of evaluating the merits and risks of the
proposed investment and therefore have the capacity to protect their own
interests in connection with the acquisition of the Pentegra Common Stock.
Shareholders and their representatives have had an adequate opportunity to
ask questions and receive answers from the officers of Pentegra concerning
any and all matters relating to the background and experience of the officers
and directors of Pentegra, the plans for the operations of the business of
Pentegra, and any plans for additional acquisitions and the like.
Shareholders and their representatives have asked any and all questions in
the nature described in the preceding sentence and all questions have been
answered to their satisfaction. Shareholders are "accredited investors" as
defined in Regulation D of the Securities Act of 1933, as amended.
SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and
Shareholders recognize and
<PAGE>
acknowledge that they had in the past, currently have, and in the future may
possibly have, access to certain confidential information of Pentegra that is
valuable, special and unique assets of Pentegra's businesses. Company and
Shareholders agree that it will not disclose such confidential information to
any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, unless (i) such information becomes available to or known
by the public generally through no fault of Company or Shareholders, (ii)
disclosure is required by law or the order of any governmental authority
under color of law, provided, that prior to disclosing any information
pursuant to this clause (ii), Company and Shareholders shall, if possible,
give prior written notice thereof to the other parties hereto, and provide
such other parties hereto with the opportunity to contest such disclosure,
(iii) Company and Shareholders reasonably believe that such disclosure is
required in connection with the defense of a lawsuit against the disclosing
party, or (iv) Company and Shareholders are the sole and exclusive owner of
such confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Company or Shareholders of the provisions of this SECTION 13, Pentegra shall
be entitled to an injunction restraining Company and Shareholders from
disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Pentegra from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. The obligations of the parties under this SECTION 13 shall
survive the termination of this Agreement.
SECTION 14. MISCELLANEOUS.
14.1 TAX COVENANT. The parties intend that the transactions
contemplated by this Agreement will qualify as a reorganization within the
meaning of Section 368(a) of the Code. The tax returns (and schedules
thereto) of Shareholders, Company and Pentegra shall be filed in a manner
consistent with such intention and Shareholders and Pentegra shall each
provide the other with such tax information, reports, returns or schedules as
may be reasonably required to assist the other in so reporting the
transactions contemplated hereby.
14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Pentegra:
Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554
with a copy of each notice directed to Pentegra to:
James S. Ryan, III, Esquire
Jackson & Walker, L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822
If to Company and Shareholders:
<PAGE>
To address set forth on EXHIBIT 14.2
with a copy to:
Person and address set forth on EXHIBIT 14.2
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.
14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any
further acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of
the parties to this Agreement shall pay all of the costs and expenses
incurred by such party in connection with the transactions contemplated by
this Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Company or any Shareholder for services
rendered in connection with negotiating and closing the transactions
contemplated by this Agreement or the documents to be executed in connection
herewith, whether or not such costs or expenses are incurred before or after
the Closing Date.
14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and
its terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Company.
14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF
Company AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.
14.7 CAPTIONS. The captions or headings in this Agreement are made
for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this
Agreement are integral parts of this Agreement as if fully set forth herein,
and all statements appearing therein shall be deemed disclosed for all
purposes and not only in connection with the specific representation in which
they are explicitly referenced.
14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE
PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.
14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which
<PAGE>
when so executed shall be deemed to be an original, and such counterparts
shall together constitute and be one and the same instrument
14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Company, be relieved from its obligations
to Company under this Agreement.
14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Company, on the other hand, file suit in any court against any other
party to enforce the terms of this Agreement against the other party or to
obtain performance by it hereunder, the prevailing party will be entitled to
recover all reasonable costs, including reasonable attorneys' fees, from the
other party as part of any judgment in such suit. The term "prevailing party"
shall mean the party in whose favor final judgment after appeal (if any) is
rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those reasonable attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.
14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a
pro rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Company and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Company or may demand from Company, and Company agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.
14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
14.15 ARBITRATION. Upon the request of either Pentegra or the
Companys or Shareholders (hereinafter referred to as a "Party"), whether made
before or after the institution of any legal proceeding, any dispute among
the parties hereto in any way arising out of, related to, or in connection
with this Agreement (hereinafter a "Dispute"), shall be resolved by binding
arbitration in accordance with the terms of this Section (hereinafter the
"Arbitration Program").
All Disputes between the Parties shall be resolved by binding
arbitration administered by the American Arbitration Association (the "AAA")
in accordance with the terms of this Arbitration Program, the Commercial
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.
The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been
completed and the arbitrators have determined each party's post-arbitration
obligations and responsibilities as it relates to such warranties and
covenants. No provision of, nor the exercise of any rights under, this
Arbitration Program shall limit the right of any Party at any time to seek or
use ancillary or
<PAGE>
preliminary judicial or non-judicial self help remedies for the purposes of
obtaining, perfecting, preserving, or foreclosing upon any personal property
in which there has been granted a security interest or lien by a Party in the
Documents. In Disputes involving indebtedness or other monetary obligations,
each Party agrees that the other Party may proceed against all liable
persons, jointly and severally against one or more of them, without impairing
rights against other liable persons. Nor shall a Party be required to join
the principal obligor or any other liable persons (e.g., sureties or
guarantors) in any proceeding against a particular person. A Party may
release or settle with one or more liable persons as the Party deems fit
without releasing or impairing rights to proceed against any persons not so
released. All statutes of limitation that would otherwise be applicable
shall apply to any arbitration proceeding.
The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.
To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoeniz,
Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or by
applicable law or regulation.
14.16 SEVERABILITY. If any provision of this Agreement shall be found
to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect. In lieu of such
provision, there shall be added automatically as part of this Agreement, a
provision as similar in its terms to such provision as may be possible and be
legal,
<PAGE>
valid and enforceable.
[End of Page]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
RONALD M. YAROS, D.D.S., P.C.
By: /s/ Ronald M. Yaros, D.D.S.
------------------------------------
Its: President
-----------------------------------
PENTEGRA DENTAL GROUP, INC.
By: /s/ Kim Rozman
------------------------------------
Its: Senior Vice President
-----------------------------------
/s/ Ronald M. Yaros, DDS
----------------------------------------
Ronald M. Yaros, DDS
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Annex I Merger Consideration
A Target Companies
2.1 Corporate Existence; Good Standing; Shareholders/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Directors and Officers; Payroll Information; Employment
Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
4.16 Excluded Assets and Excluded Liabilities
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice
<PAGE>
<TABLE>
<S> <C>
---------------- -------------------
NUMBER SHARES
PEN P E N T E G R A
---------------- PENTEGRA DENTAL GROUP, INC. -------------------
COMMON STOCK INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE PAR VALUE $.001
PER SHARE
CUSIP 709637 10 2
SEE REVERSE FOR CERTAIN
DEFINITIONS AND LEGENDS
This Certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $.001 PER SHARE, OF
PENTEGRA DENTAL GROUP, INC.
(hereinafter referred to as the "Corporation"), transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate and the shares represented
hereby are issued under and shall be held subject to the provisions of the State of Delaware and all of the provisions of the
Restated Certificate of Incorporation and Bylaws of the Corporation and any amendments thereto (copies of which are on file at
the office of the Corporation), to all of which the holder, by acceptance hereof, assents. This certificate is not valid until
countersigned and registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.
Dated:
COUNTERSIGNED AND REGISTERED:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
(Jersey City, NJ)
[SEAL] TRANSFER AGENT
AND REGISTRAR
/s/ Gary S. Glatter /s/ Kim Rozman BY
PRESIDENT AND
CHIEF EXECUTIVE OFFICER SECRETARY AUTHORIZED OFFICER
<PAGE>
PENTEGRA DENTAL GROUP, INC.
The Corporation is authorized to issue Common Stock, par value $.001 per share and Preferred Stock, par value $.001 per share.
The Board of Directors of the Corporation has authority to fix the number of shares and the designation of any series of
Preferred Stock and to determine the powers, designations, preferences and relative, participating, optional or other rights
between classes of stock or series thereof of the Corporation, and the qualifications, limitations or restrictions of such
preferences and/or rights. The Corporation will furnish without charge to each stockholder who so requests a full statement of
the foregoing as established from time to time by the Restated Certificate of Incorporation of the Corporation and by any
certificate of designations. Any such request shall be made to the Secretary of the Corporation at the offices of the Corporation.
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- _____________ Custodian _______________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act ___________________________________
in common (State)
UNIF TRF MIN ACT -- ____________ Custodian (until age _____)
(Cust)
________________ under Uniform Transfers
to Minors Act __________________________
(State)
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
For Value Received, _________________________________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
| |
| |
_____________________________________________________________________________________________________________________________
_____________________________________________________________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE
_____________________________________________________________________________________________________________________________
_____________________________________________________________________________________________________________________________
______________________________________________________________________________________________________________________ Shares
of the Common Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint
____________________________________________________________________________________________________________________ Attorney
to register the transfer of the said shares of Common Stock on the books of the within-named Corporation, with full power of
substitution in the premises.
Dated _________________________________
X _______________________________________________
(SIGNATURE)
NOTICE:
THE SIGNATURE(S) TO
THE ASSIGNMENT MUST
CORRESPOND WITH THE
NAME(S) AS WRITTEN ---------------> X _______________________________________________
UPON THE FACE OF THE (SIGNATURE)
CERTIFICATE IN EVERY
PARTICULAR, WITHOUT
ALTERATION OR ANY
CHANGE WHATEVER.
_________________________________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad-16.
_________________________________________________
SIGNATURE(S) GUARANTEED BY:
_________________________________________________
</TABLE>
<PAGE>
[LETTERHEAD]
December 10, 1997
Pentegra Dental Group, Inc.
2999 N. 44th Street
Suite 650
Phoenix, Arizona 85018
Re: Registration Statement on Form S-1 of Pentegra Dental Group, Inc.
Registration No. 333-37633
Gentlemen:
We are acting as counsel for Pentegra Dental Group, Inc., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), of the offer and sale of up to
2,500,000 shares (and up to an additional 375,000 shares to cover underwriters'
over-allotments) of the Company's Common Stock, par value $.001 per share (the
"Shares"). A Registration Statement on Form S-1, Registration No. 333-37633 has
been filed with the Securities and Exchange Commission (the "Commission") and we
understand that an Amendment No. 1 to From S-1 is expected to be filed with the
Commission on or about the date hereof (as amended, the "Registration
Statement"). The Shares are to be sold to the underwriters for resale to the
public as described in the Registration Statement and pursuant to the
underwriting agreement (the "Underwriting Agreement") filed as an exhibit to the
Registration Statement.
In reaching the conclusions expressed in this opinion we have examined and
relied on such documents, corporate records and other instruments, including
certificates of public officials and certificates of officers of the Company,
and made such further investigation and inquiry as we have deemed necessary to
reach the opinions expressed herein. In making the foregoing
<PAGE>
Pentegra Dental Group, Inc.
December 10, 1997
Page 2
examinations, we have assumed the genuineness of all signatures on original
documents, the authenticity, accuracy and completeness of all documents
submitted to us as originals and the conformity to original documents of all
copies submitted to us.
Based solely upon the foregoing, subject to the comments and exceptions
hereinafter stated, it is our opinion that the Shares, when sold by the Company
in accordance with the terms of the Underwriting Agreement for consideration
having a value not less than the par value thereof, will be validly issued,
fully paid and nonassessable.
We express no opinion as to the laws of any jurisdiction other than the
General Corporation Law of the State of Delaware and the federal laws of the
United States of America, in each case as in effect on the date hereof.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to our firm therein under the
caption "Legal Matters." In giving this consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Act or the rules and regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ Jackson Walker, L.L.P.
Jackson Walker, L.L.P.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 (File
No. 333-37633) relating to the registration of 2,500,000 shares of $0.001 par
value common stock of our report dated December 10, 1997 on our audit of the
financial statements of Pentegra Dental Group, Inc. as of September 30, 1997 and
for the period from inception, February 21, 1997, through September 30, 1997. We
also consent to the reference to our firm under the caption "Experts."
/s/ COOPERS & LYBRAND L.L.P.
Houston, Texas
December 11, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> FEB-21-1997
<PERIOD-END> SEP-30-1997
<CASH> 354
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 354
<PP&E> 69
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,071
<CURRENT-LIABILITIES> 1,006
<BONDS> 0
1,089
0
<COMMON> 18
<OTHER-SE> 708
<TOTAL-LIABILITY-AND-EQUITY> 2,071
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 750
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (750)
<INCOME-TAX> 0
<INCOME-CONTINUING> (750)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (750)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>